The government has launched a new fund aiming to ease the burden on people and small businesses that were left with heavy debt following the COVID-19 pandemic.

The Financial Services Commission and the Korea Asset Management Corporation held a launch ceremony for the fund at the headquarters of the Credit Counseling & Recovery Service on Wednesday.

The program will cover delinquent loans of up to 50 million won, or around 35-thousand U.S. dollars, in principal that have been overdue for more than seven years. 

About one-point-13 million people are expected to benefit, with the estimated eligible debt totaling 16 trillion won. 

The fund will first purchase the debt from financial institutions for roughly 840 billion won, or 5 percent of face value,  and fully or partially write it off.

The government and financial sector will jointly finance the purchase.

The amount forgiven will vary by the borrower's income and likelihood of making their creditors whole. Debtors with some ability to repay will have their principal reduced by 30 to 80 percent.

Interest-free installment repayment plans spanning up to 10 years are also available, as are additional special loans and welfare-linked aid.