Should Identity Theft Victims File Bankruptcy?
As technology continues to evolve, identity theft has become an increasingly common crime. These criminals may steal your information out of your purse or wallet, or may manage to access it digitally. Identity thieves can use your information to open new credit cards, take out car loans, and incur other types of debts. When they inevitably don’t pay on these debts, it’s your credit report that will receive negative marks. Read on to learn more about how to dispute fraudulent debts after your identity has been stolen, and if bankruptcy may help your financial situation after being a victim of identity theft.
What Should I Do If My Identity Has Been Stolen?
One of the first things you should do after discovering that your identity has been stolen is report it to the Federal Trade Commission (FTC). The FTC report will establish that you have been a victim of identity theft, so you should keep this for your records in case any creditors request to see it. The FTC also has form letters you can send to any collectors who are contacting you for a fraudulent debt. You should attach a copy of your FTC report along with any letters that you send your creditors regarding fraudulent debts.
You can also call one of your credit reporting agencies to report the identity theft. This will place a fraud alert on your credit report. If you report the identity theft with Equifax, Experian, or TransUnion, the one you select will be required to report the identity theft to the other two agencies. You will need to verify your name, social security number, and other personal information to place a fraud alert on your credit report. The fraud alert will be active for 90 days. Any creditors who receive requests to open new accounts during this time will need to call you to personally verify that you made the request. You can file a police report for the crime, or your credit reporting agency may do it for you. Depending on the facts of your specific case, you may be required to file a police report to have fraudulent debts removed from your credit report. This could also involve later testifying if the perpetrator is ever found and charged.
Next, you should start reporting the identity theft to your lenders. If you haven’t already, change all of your passwords, and usernames where possible. Most of your account holders should allow you to close your accounts and open new ones with new login information and PIN numbers. Some of these accounts may also clear fraudulent charges for you without further action on your part.
Once you have reported the identity theft to all the applicable entities and disputed any fraudulent charges, you will need to wait and see if the thief continues to fraudulently use your information. You will need to monitor your credit report for information from lenders that you haven’t contacted.
Even if you act quickly in taking all of these steps, your credit may still suffer long term negative effects. Once the fraud alert has stopped new debts from being incurred, you will need to take steps to improve your credit.
Does Bankruptcy Fix Identity Theft?
Fortunately, the debts incurred through identity theft are usually dischargeable in bankruptcy. If you file Chapter 7 bankruptcy, unsecured nonpriority debts will be wiped away- even those that you don’t know about, as long as they were incurred before your petition was filed. All of the creditors in your credit report will be notified of your bankruptcy filing, and if any creditors appear after your case is discharged, they will usually leave you alone after you provide your case number. Amending your petition to include that creditor is also a fairly simple process. However, you will need to make sure your accounts have been frozen before filing your petition- if the thief continues to incur fraudulent charges after your petition has been filed, these debts won’t be discharged in the bankruptcy and you will need to address them separately.
Does It Make Sense to File Bankruptcy If You Are a Victim of Identity Theft?
If you read the steps to disputing identity theft and felt exhausted, you aren’t alone. Being a victim of identity theft can mean countless hours of phone calls, monitoring your credit, and potentially even attending hearings to prove the debt was fraudulent. Depending on how many accounts the thief took out, it may be faster and easier to declare bankruptcy than dispute every charge the thief incurred. Hiring a lawyer to dispute each charge for you will likely be far more expensive than a bankruptcy attorney.
A sad truth is that it isn’t always some stranger thousands of miles away hacking your information to steal your identity. Sometimes diseases such as addiction may cause your loved ones to accumulate thousands in credit card debt in your name, essentially stealing your identity. To have fraudulent debts removed from your credit report without filing bankruptcy, you may be required to file police reports. While filing bankruptcy is undoubtedly a large sacrifice to make for a loved one, it may be an easier option for you than sending a loved one to jail.
Another reason it may make more sense to file bankruptcy instead of disputing your charges is if you have other existing dischargeable debt. If you have credit cards, medical bills, and other unpaid debts, it may make more sense to simply discharge those along with the fraudulent debts in bankruptcy. If anyone asks why you filed bankruptcy, you can always blame it on the identity theft.
Bankruptcy is an Option, It isn’t always the Best Option
While filing bankruptcy can have great benefits for victims of identity theft, it isn’t the best option in every situation. Call today to have one of our bankruptcy professionals evaluate your case for free. In your free consultation, we can help you determine if your identity theft debts are dischargeable in bankruptcy, what chapters you qualify for, and guide you through the process. Our skilled attorneys can provide you with an honest opinion if it would be better for you to dispute the fraudulent charges rather than file bankruptcy. We have same day consultations available, so schedule your free call today. (702) 370-0155.