3-Line Summary
- Even if you have fully paid off your installments, the collateral (mortgage) from the capital company is not automatically canceled. If a mortgage remains on Section B of the Vehicle Registration Certificate, the junkyard (automotive dismantling/recycling company) will not accept the vehicle for scrapping.
- Scrapping due to vehicle age (exceeding vehicle age limit) is a way to dispose of old cars with seizures, but cars that only have a mortgage without seizures cannot be scrapped using this method (Ministry of Government Legislation Interpretation 13-0387). For an old car with a remaining mortgage, the cancellation of the mortgage must come first.
- After completing the cancellation of the mortgage and the release of small-scale seizures, once you hand over the car for scrapping, you proceed to deregistration using the Scrapping Certificate, which leads to canceling car insurance and settling automobile taxes based on the deregistration date.
Table of Contents
- The day the tow truck returned empty-handed
- Why a car with a mortgage cannot be scrapped
- Scrapping due to vehicle age: Why seizures are allowed but mortgages are not
- How to cancel a mortgage on a car with fully paid installments
- One seizure for a fine: Which is faster, payment or scrapping due to vehicle age?
- From scrapping handover to deregistration and insurance cancellation
- Things to check before scrapping a car with a mortgage or seizure
- Services provided by the administrative agent office
1. The day the tow truck returned empty-handed
I am an administrative agent (administrative scrivener) with an office in Songdo, Incheon. I would like to introduce an episode I encountered while working.
Sometimes, the simplest-looking tasks take the longest. Scrapping a car is one of those cases. It seems like it would be finished once you hand over the car and receive a single piece of paper, but a single entry in the registration certificate can cause it to take several weeks.
First, I received two photos via email. One was a silver compact sedan parked in an apartment’s underground parking lot, and the other was a screenshot of the Vehicle Registration Certificate sent by a junkyard employee. The body of the email was short: “The tow truck came but just left. They say it can’t be scrapped because there is a mortgage, but I fully paid off the installments three years ago.”
The sender was a woman in her early 30s working as a Pilates instructor in Songdo. The car was a 2013 model; she bought it used in 2019 using a 36-month installment plan from a capital company and paid the final installment in 2022. This summer, the transmission broke, and the repair estimate came to 2.8 million won. Since the repair cost was higher than the car’s value, she decided to scrap it.
Time was also not on her side. She was scheduled to move to a rental house in Seoul with no parking space in five weeks, and the management office had already posted a notice regarding a long-term parked vehicle once. There were only 17 days left until her car insurance renewal date. If she failed to dispose of the car, she would be in a situation where she would have to pay for another year of insurance for a car she could not even drive.
2. Why can’t a car with a mortgage be scrapped?
On the afternoon of the scheduled appointment, the client brought a newly issued Vehicle Registration Certificate. The certificate is largely divided into two parts. The Gap-gu (Section A) contains information regarding the owner and seizures, while the Eul-gu (Section B) records mortgages.
In the Eul-gu section, a collateral mortgage from a capital company established in 2019 remained unchanged. The client mentioned they thought the company would automatically cancel it once the installments were fully paid. In reality, that is not the case. Even after the loan is completed, one must apply for the cancellation of the mortgage registration to have it removed from the certificate. Many people encounter this section for the first time only when it comes time to sell or scrap the car.
There was also an entry in the Gap-gu section. It was one seizure due to unpaid parking violation fines from 2021. The client had no memory of receiving the notice. Since they had moved addresses that year, there was a high possibility that the mail was sent to their previous home.
This is why the junkyard refused the application. Article 13 of the 「Motor Vehicle Management Act」 stipulates the deregistration of a vehicle upon a request for scrapping, and Article 31, Paragraph 10 of the 「Motor Vehicle Registration Decree」 requires that if there is a third party with an interest in the registration, such as a mortgagee, their consent must be attached to the application for deregistration. This is because the collateral disappears once the car is dismantled. Therefore, if a junkyard sees a mortgage on the certificate, they stop everything, starting with towing.
In this state, the car could not be moved.
3. Why Vehicle Age-Exceeding Deregistration is Possible Even with Seizures, but Not with Mortgages
The client had already searched online before sending the first email. They had found posts stating that “even with seizures, old vehicles can undergo vehicle age-exceeding deregistration,” and mentioned that the junkyard staff had said the same thing. Therefore, their very first question during the consultation was, “Can’t I just use vehicle age-exceeding deregistration?”
Cancellation due to vehicle age exceeds the standard is a system based on Article 13, Paragraph 1, Item 7 of the 「Motor Vehicle Management Act」. It allows for the cancellation of vehicles that, even after being registered for seizure, have not undergone liquidation procedures such as auctions and are recognized as having no remaining liquidation value because they have exceeded the vehicle age standard. For passenger cars, the standard is 11 years or more according to Article 31, Paragraph 2 of the 「Motor Vehicle Registration Decree」, and this 13-year-old vehicle was eligible based solely on its model year.
The problem was the collateral mortgage in the secondary section (Eul-gu). In its legal interpretation (13-0387), the Ministry of Government Legislation held that even for a vehicle whose age exceeds the standard, cancellation registration under this clause cannot be performed if only collateral mortgages, provisional injunctions, or provisional seizures are registered without other seizure registrations. The intent is that a collateral mortgage can only be considered a seizure once the mortgagee applies for an auction and a seizure registration is made.
The status by vehicle condition is as follows:
- Old vehicles with only seizures: Cancellation due to vehicle age exceeds the standard is possible if the requirements are met.
- Old vehicles with only mortgages: Since they are not subject to cancellation due to vehicle age exceeds the standard if there is no seizure registration, the mortgage must be cleared first.
- Old vehicles with both mortgages and seizures: If there is a seizure registration, one can apply for cancellation due to vehicle age exceeds the standard, but it takes time because the registration authority notifies interested parties, such as the mortgagee, and provides a period of within one month (Article 31, Paragraph 3 of the 「Motor Vehicle Registration Decree」). To proceed with general scrapping, the mortgage must be cleared first.
- Delinquencies remain even after cancellation due to vehicle age exceeds the standard: The vehicle simply disappears from the registry, but fines or taxes follow the owner to their other assets.
The information I saw in the search was not incorrect. That post was about a vehicle with only seizures, but this vehicle had an additional mortgage. Reading the regulations is easy, but choosing which regulation applies to my vehicle is the difficult part.
4. How to Cancel the Remaining Mortgage on a Fully Paid-Off Car
First, we decided to cancel the mortgage. If we changed the order, even if the seizure was lifted, scrapping the car would still be blocked.
The client’s installment agreement contained the name of the capital company as it was in 2019. When I called the customer center, the first response was, “The contract in question cannot be found.” Upon checking, I discovered that the company had merged with another financial institution in 2021, and its trade name had changed. The old trade name remained on the vehicle registration register, and the new company’s computer system could only search for it using the old contract number.
At this point, having received the client’s delegation, I prepared three things:
- Evidence of full payment: I collected the bank transaction history showing the final installment payment and a screenshot of the full payment notification text message received in 2022. This was used to locate the contract in the company’s system.
- Mortgagee information on the register: I wrote down the mortgagee’s trade name and the date of establishment exactly as they appeared on the register and sent them to the company after the merger. This was to ensure the company could immediately identify that the mortgage was established under the old trade name.
- Confirmation of the cancellation method: I inquired in advance whether the company would apply for electronic cancellation directly or if they would send documents for cancellation (such as the mortgagee’s power of attorney, corporate seal certificate, etc.). This is because whether or not a visit to the registration office is required depends on the method.
After locating the contract, the company replied that they would send the documents for cancellation via registered mail. The documents arrived six days later. Our office prepared the application for cancellation of mortgage registration and submitted it to the vehicle registration office along with the received documents, and we confirmed that the mortgage in Section B of the register was canceled that afternoon.
Mortgages from financial institutions that have changed their trade names due to mergers are common. In such cases, sending the old contract number along with the details recorded in the register will speed up the search process.
5. 1 Case of Fine Seizure: Which is Faster, Payment or Vehicle Age Exceeding Cancellation?
Once the mortgage was released, only one seizure remained in the first section (Gap-gu). There were two ways to handle the remaining seizure.
- Vehicle Age Exceeding Cancellation: Since the seizure registration remains, you can apply for this. However, due to the public notice process, it often takes around 50 days to complete, and the unpaid fine remains.
- Lifting the Seizure After Paying the Fine, then General Scrapping Cancellation: This involves paying the overdue amount, requesting the seizing authority to lift the seizure, and then handing the vehicle over for scrapping with a clean registration record.
Upon checking, the original fine of 40,000 KRW had accrued interest, bringing the total to a little over 70,000 KRW. If the unpaid amount were large, there would be a reason to consider vehicle age exceeding cancellation. The situation for this vehicle was different. With only 5 weeks until the move and 17 days until the insurance renewal, I could not wait 50 days. It was a fine that had to be paid anyway.
The client made the payment that very evening. The next day, I requested the lifting of the seizure from the issuing authority and sent the payment confirmation screen along with it. Three days later, I confirmed that the seizure on the first section of the registry had been lifted.
There was a small commotion during this part. When I re-issued the registry to check if the seizure had been lifted, I saw that the owner’s address was still the same as it was in 2019. Because the address had not been updated, the notice had been sent to the old house. The client laughed and said, “Then that fine notice must still be in the mailbox of my old house.” Since it was a car being scrapped, they hadn’t bothered to change the address, but I left a note for them to check their address first when they buy their next car.
6. From Vehicle Scrapping Pickup to Deletion Registration and Insurance Cancellation
Once the registry was cleared, I contacted the junkyard again. The tow truck arrived two days later in the morning, and this time, they took the car away.
The steps following the scrapping of a vehicle are as follows:
- Vehicle Scrapping Pickup: As the vehicle recycling company takes possession of the car, they issue a Certificate of Vehicle Scrapping. The license plates and registration certificate are also handed over at this time.
- Deletion Registration: When scrapping is requested, the junkyard (vehicle recycling business operator) applies for deletion registration on behalf of the owner in accordance with Article 13, Paragraph 2 of the 「Motor Vehicle Management Act」. According to Article 31, Paragraph 1 of the 「Motor Vehicle Registration Decree」, the deadline is one month from the date the cause for registration occurred. The owner may apply directly, and the owner must verify whether the application has actually been received.
- Confirmation of Deletion: Once the deletion is complete, obtain a Certificate of Confirmation of Vehicle Deletion Registration. This is used for insurance cancellation and tax settlement.
- Insurance Cancellation and Refund: If you cancel your automobile insurance based on the date of deletion, you will receive a refund for the remaining period.
- Automobile Tax Settlement: Automobile taxes are settled based on the date of deletion registration. If you have paid your taxes annually in advance, check with the competent tax department regarding the refund for the remaining period.
In this case, the junkyard applied for the deletion registration the day after the pickup, and our office obtained the Certificate of Confirmation of Vehicle Deletion Registration and sent it to the client. The client canceled the insurance four days before the insurance renewal date.
On the day the car was being emptied, 12 Pilates ring props came out of the trunk. The client said they had loaded them when moving their class location and had forgotten about them. While the tow truck driver was taking out the rings one by one and handing them over, several neighbors in the parking lot looked on, wondering what was happening.
7. Things to Check Before Scrapping a Car with Mortgages or Seizures
If you are in a similar situation, please check in the following order.
Required Documents
- Application for Cancellation of Vehicle Registration (Legal Form), and check whether the junkyard will apply on your behalf
- Vehicle Registration Certificate (Check both Section A and Section B)
- Application for Cancellation of Mortgage and documents for cancellation sent by the mortgagee (Power of Attorney, Corporate Seal Certificate, etc.); omit if the company cancels electronically
- Bank transaction statements or payment completion messages proving full installment payment
- Confirmation of seizure release (Documents confirming payment of arrears)
- Vehicle Scrapping Certificate, Vehicle Registration Certificate, License Plates
- ID card, Power of Attorney in case of application by a proxy
Order of Verification
- Check Section B of the registration certificate first. If a mortgage remains, both the junkyard process and the cancellation due to vehicle age (exceeding vehicle age) will be blocked.
- Check if the mortgagee’s business name has changed. If it has changed due to merger or sale, send the old contract number along with the details recorded in the registration certificate.
- Decide on the method for releasing seizures by looking at the amount of arrears and the remaining time. If the amount is small and time is urgent, release it after payment; if the arrears are large and there is sufficient time, consider cancellation due to vehicle age.
- Personally verify whether the cancellation registration has been received. Do not cancel your insurance before receiving the Certificate of Cancellation.
Requirements and processing periods may vary depending on the specific case and jurisdiction, so individual verification is required. For accurate legal provisions and interpretations, please check the National Law Information Center or the competent authority.
8. Administrative Agent Office Services
Hwang Yunsang Administrative Agent Office prepares and files documents to be submitted to administrative agencies regarding vehicle deregistration. The tasks handled in this case are as follows:
- Analysis of the Vehicle Registration Certificate (Part A and Part B) and determination of the deregistration method (General Scrapping Deregistration / Deregistration due to Vehicle Age Exceeding Standards)
- Identification of the mortgagee for the collateral established under the trade name used prior to merger, and organizing data for requesting documents for deregistration
- Preparation of the application for deregistration of mortgage and agency service for submission to the Vehicle Registration Office
- Organizing data for requesting the release of seizures and verifying whether the release has been completed
- Verification of deregistration submission and agency service for issuing the Certificate of Vehicle Deregistration
As an administrative agent (administrative scrivener) who handles vehicle registration and deregistration tasks, a scene I frequently encounter is a situation where the vehicle registry must be cleared before the vehicle itself. While a car might be towed away in just two days, clearing a single line in the registry can sometimes take several weeks.
The client packed their belongings without their car two weeks before moving. I heard that another household’s bicycle had been parked in the very spot where the car used to be.
This text has been reconstructed for better understanding and is not related to any specific person or event.
This is an administrative agent (administrative scrivener) office located in Songdo, Incheon (POSCO Tower Songdo). We provide services for administrative appeals, licensing/reporting document preparation/filing, foreign immigration (visas/residency), regular administrative management, as well as documents for vehicle transfer, mortgage cancellation, and scrap vehicle deregistration. If you are unable to dispose of your vehicle in Incheon or Songdo due to mortgages or seizures, you may start by sending us a single copy of your vehicle registration certificate. If you are curious about a similar situation, please feel free to leave an inquiry.
━━━━━━━━━━ Hwang Yunsang Administrative Agent Office 📍 Room 2697, POSCO Tower Songdo, 165 Convensia-daero, Yeonsu-gu, Incheon 📞 010-3374-2687 🌐 www.hwangadmin.com ━━━━━━━━━━
