Identity fraud and bankruptcy

• Tweet

April 10th, 2009 - Posted by Caitlin

The already devastating crime of identity theft has taken an alarming new turn. Identity thieves are not only ruining their victims' credit by racking up unpaid debt. Now, many of them are now filing for bankruptcy protection in their victims' names. A contributing factor to this practice is the current housing downturn and the resulting rise in the number of foreclosure proceedings.

Lured by the benefits of the automatic stay provision that goes into effect when a bankruptcy case is filed, some unscrupulous homeowners on the verge of foreclosure are using identity theft as a tool to buy themselves extra time, either by convincing a friend, relative, or coworker to allow the delinquent property to be transferred into their name, or by stealing someone else's identity outright. In most cases, the identity thief will simply fail to show up for the bankruptcy hearing. The case is subsequently dismissed, but the filing remains on the victim's credit report.

Most victims of this type of identity fraud only become aware of the crime when they attempt to obtain a loan or other form of credit, months or even years later. When asked why their application was denied, they are shocked to discover that a bankruptcy filing has been recorded in their name.

Recovering from bankruptcy-related identity theft can be much more difficult and costly than other forms of identity theft. It is often necessary to hire a lawyer in order to prove to the bankruptcy court that the filing was fraudulent, and, if the filing took place in another county or state, the victim may need to travel to that jurisdiction to have the case voided and expunged from the court's records.

To find out more about various types of identity fraud and their warning signs, visit the US Department of Justice's fraud division website. If you suspect that you may have been a victim of bankruptcy fraud, contact the United States Trustee Program to file a report. See NextAdvisor.com's reviews and comparison chart to learn about identity theft protection services.