Bankruptcy: A Clean Slate for Victims of Identity Theft

Submitted by Freedom A. on Tue, 03/03/2020 - 8:14am

Bankruptcy: A Clean Slate for Victims of Identity Theft

Identity theft is a serious crime that can destroy your financial life. 

Consumer Affairs reports that between 7-10% of the U.S. population are affected by identity theft every year; 21% of those are repeat identity theft victims.

If someone else is using your name, driver's license information, social security number, or credit card, they can apply for lines of credit or credit cards and rack up thousands of dollars in debt - that you might be responsible for paying back. By stealing your identity, you can wind up with financial and legal problems, and it can happen faster than you thought possible.

Types of Identity Theft

Identity theft generally falls under one of the following three areas:

  • Tax identity theft occurs when someone uses your personal SSN to file false tax returns at either the state or federal level;
  • Medical identity theft happens when someone takes your health insurance number or Medicare ID. A criminal can use your information to get medical services for free or send falsified bills to your health insurance provider;
  • Social identity theft is arguably the most common form of identity theft. It happens when someone steals your identity and uses it to apply for credit or to rack up other financial debt. 

If someone steals your identity, you must begin the process of fixing things as quickly as possible. It's essential to reach out to 

  • financial institutions and credit card companies informing them that you are a victim of identity theft;
  • local law enforcement and report the crime; 
  • credit reporting agencies.

And don't forget to change any passwords for online banking, accounts, and credit cards.

Most people can correct identity theft matters themselves by contacting credit agencies or lenders directly. But every situation is as unique as the person affected. That means, in some instances, identity theft can be so severe that people will look at bankruptcy as a way to resolve their difficulties and reclaim their stolen identity.

If you've had your identity stolen and you've exhausted all other options, but you still can't see the finish line, you may be thinking about filing for bankruptcy to bring the matter to an end. But can bankruptcy help you recover identity theft?

A Clean Slate Through Bankruptcy Filing   

If you've had your identity taken and used by someone else, you are probably getting calls from collectors looking for payment on a debt you didn't incur. And that means your credit score will take a big hit. The sad reality is that even if you file a police report and contact credit reporting agencies like Equifax, Experian, or TransUnion and make sure creditors know what's happening, your credit rating can still fall. 

Unless law enforcement is successful in catching the criminal who stole your identity, it can be almost impossible to prove to your creditors that it was someone else who racked up those charges, under your name. In that situation, you're the one responsible for the charges.

Too often, identity theft victims are still trying to clean up poor credit scores several years after the first event occurs, despite completing an Identity Theft Report and notifying the FTC.

The situation can get even worse if debt collection agencies forward debts to other agencies. You may think everything has been taken care of only to find out, years down the road, when a new collection agency contacts you out of the blue, demanding payment on the fraudulent debt. 

As the victim of identity theft, you should not have to pay for charges that someone else made. You should be able to contact everyone, creditors, and credit bureaus alike, let them know what happened, and have them understand by erasing the debt. Unfortunately, this doesn't happen for everyone who has had their identity stolen.

Identity Theft: A Lifelong Battle

Many victims of identity theft face a life-long battle attempting to clear their good name, never fully resolving the issue. It can be overwhelming. This is the primary reason why some people look to file for bankruptcy as a way to make a clean start.

  • Bankruptcy discharges unsecured debt, which makes up the majority of financial obligations associated with identity theft. That means a fresh start—no more calls from creditors demanding payments for charges you didn't make. 
  • Bankruptcy can help you reclaim your identity by erasing all the negative financial issues, giving you back control of your finances and your life. 
  • Bankruptcy is not the first-choice or one-size-fits-everyone answer. But for those experiencing the extreme impact of identity theft, who have exhausted all other options, it can be an effective solution. 

If you have been the victim of identity theft, and you've tried everything you can think of, but you are still under the financial burden of bad debt and unyielding creditors, speaking to a bankruptcy attorney might be the right step for you.

For information on whether bankruptcy can help you recover from identity theft, contact the Law Offices of John T. Orcutt today.

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