“Suseong Lake and the department store site were all our land” ... How Kim Yong-bin Lost 8 Billion Won and Ended Up Penniless

[Financial News] Singer Kim Yong-bin said his grandfather was a well-known landowner in Daegu, but lost all of his real estate, worth several billion won, and fell into ruin after a single ill-advised guarantee.
Appearing on KBS2’s Boss in the Mirror, which aired on the 18th, singer Kim Yong-bin revealed that his great-grandfather had been a wealthy man who owned substantial property in Daegu’s major commercial districts and other areas, but lost his entire fortune—worth 7 billion to 8 billion won at the time—after making a bad guarantee. Given the value of money at the time and current property prices, the actual loss is estimated to have amounted to tens of billions of won or more.
Kim Yong-bin said he grew up receiving strict guidance from his grandmother, who had personally experienced the family’s downfall: “Never engage in financial dealings or guarantee anyone’s debt.” He said he continues to follow conservative asset-management principles, including keeping handwritten household accounts and spreading his savings across about 60 bank accounts.
The main cause of the Kim family’s downfall is believed to have been the widespread practice of “joint and several guarantees” in financial dealings at the time.
A joint and several guarantee is a perilous arrangement under which, if the principal debtor cannot repay a debt, the guarantor bears the same legal responsibility and must repay the full amount on the debtor’s behalf. Unlike an ordinary guarantor, the guarantor is not even given the right to demand that the creditor first seek payment from the original debtor.
As a result, even though the guarantor has not gained a single penny from the loan, the moment the principal debtor defaults, the guarantor faces the seizure and forced auction of their real estate, including land and homes. This is why, as in the Kim family’s history, prime property built up over generations was often auctioned off for a fraction of its value in an instant, leaving entire families bankrupt—a tragedy that frequently occurred in financial markets in the 1980s and 1990s.

As devastating social consequences, including bankruptcy and family breakdown, continued to mount, the government and financial authorities repeatedly worked to reform the system. After joint and several guarantees on personal loans were fully abolished in first- and second-tier financial institutions in 2013, steps were also taken in 2018 to fully abolish guarantees for corporate representatives at public and policy-finance institutions. The move was intended to root out the practice of financial companies readily extending loans based on third-party collateral or guarantees rather than carefully assessing borrowers’ actual ability to repay.
But the disappearance of joint and several guarantees from the formal financial sector does not mean the risk has been completely eliminated. Guarantee agreements can still be made in financial dealings between private individuals—for example, when acquaintances write IOUs or enter into contracts for the payment of goods—leaving them a potential source of legal disputes. In the illegal private lending market outside the bounds of the law, unlawful debt-collection practices continue, including demanding unofficial joint guarantees from debtors’ family members or acquaintances and coercing them to repay on the debtor’s behalf. Observers point out that harm caused by guarantees in financial blind spots remains an ongoing problem.
Defaults on debts arising from private financial transactions lead not only to monetary losses but also to severed relationships and legal disputes. Particularly while high interest rates persist, indiscriminate lending between acquaintances and lending one’s name to another carry a very high risk that the money will not be recovered.
[email protected] Moon Young-jin Reporter