It is only here in AFF that I first read about this concept and I am not quite sure if we are allowed to do this. 

There is what we call fair use which permits limited use of copyrighted material without acquiring permission from the copyright holder. 

According to the United States Constitution,

Fanfiction is not infringing if it constitutes fair use of the underlying copyrighted work. In determining whether a particular use constitutes fair use, courts consider the following four factors:

1. "the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
2. the nature of the copyrighted work;
3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4. the effect of the use upon the potential market for or value of the copyrighted work.”

Legal Issues with Fanfiction, Wikipedia

But because I'm Filipino, I also checked the Philippine Constitution.

SEC. 185. Fair Use of a Copyrighted Work. – 185.1. The fair use of a copyrighted work for criticism, comment, news reporting, teaching including multiple copies for classroom use, scholarship, research, and similar purposes is not an infringement of copyright.

It's basically the same/similar with the United States Constitution, haha xD

So, it is not necessarily illegal to sell fanfiction and fanart.

Regardless of whether your work is commercial or noncommercial, a court would also look at whether the work is transformative, whether you alter the "expression, meaning, or message" of the original content through your use of the copyrighted material.

Are fanfiction and fanart legal?, Lauren Davis (2012)

But what of celebrity fanfiction? Those fanfictions that are not based on copyrighted fictional characters, but real persons.

Some countries, including China and Canada [haha], and some states in the U.S. have laws governing rights of publicity. 

Rights of publicity or personal rights, is the right of an individual to control the commercial use of his or her name, image, likeness, or other unequivocal aspects of one's identity.

Celebrities whose names, images, likeness or personas are used in real person fiction, have the right to assert claims against fanfiction authors based on rights of publicity.

Legal Issues with Fanfiction, Wikipedia

But what is South Korea's stand in this? 

I stumbled upon the Korean Law Blog, which is owned by Sean Hayes - co-chair of the Korea Practice Team at IPG Legal, the only non-Korean who worked as an attorney for the Korean Court System and one of the first non-Koreans to be a regular member of a Korean law faculty.

Here is a translation of the official court summary regarding The Violation of Right of Publicity in Korea: Badminton Player Park Ju-Bong's Case:

Where the economic value, which is created by the name and portrait, etc. of internationally well-known former player of the national badminton team, is recognized widely among advertisement businesses and related businesses, the action of infringing the value shall constitute a tort under the Civil Act. Within the above limit of protection, the above player's exclusive control over the commercial use of one's name, portrait, etc, shall be a sufficient right for publicity, thus it is an independent and separate property right from the player's moral right, though the right is derived from the player's moral right. 

So they do have a law on rights of publicity. Kpop celebrities have the right to sue us, if they think that we are violating their rights. 

Maybe I am looking too much into this. Maybe because what I thought should be free, non-commercial...suddenly becomes a product... a fanmade good, as they say... like those unofficial kpop merchandise... those mugs and fans with the faces of kpop artists from the net plastered on them.

I mean, why not change the names and modify the image of the characters in the fanfic? Yes, the fanfics won't be published or copyrighted, but it is still going to be printed and sold, using the name of the celebrities to market it. It's going to sell not because of the storyline, let's be honest here, but because of the celebrity characters in the fic. Plot comes second. Just like badminton player Park Bu-Jong case... isn't this a violation of right of publicity? Using their name and image for profit?

I don't mean to offend anyone by posting this. I am just curious, partly concerned if there are laws about this...and I just wanted to share what I saw in the internet.

I mean, you can do whatever you want with your work. A lot have been selling these fanmade goods, from ballers to fanmade photobooks. The fanfic sales might not even affect the celebrities. So no harm done.

But isn't there any harm done?

And if this becomes a trend... 

I dunno... 

- Keeper