August 24, 2019

Can You File Bankruptcy if You Have Been the Victim of Identity Theft?

If you have been a victim of identity theft, you can file bankruptcy but you need to be prepared for potential complications.

Identity theft is a big problem in 2018 and a number of large retailers and even credit bureaus have been hacked. Personal and financial information about millions of Americans is available for sale on the “dark web” and criminals use this stolen data to open credit card accounts, sign for personal loans, and even buy houses and cars. You will not know that there was a problem at all until the bills start to arrive.

I have personally been a victim of identity theft twice. One time, a thief got hold of my credit card number and charged $5,000 to a custom suit maker in Hong Kong. In another instance, a fraudster hacked my American Express account and purchased (and picked up) a high end desktop Mac. In both of these situations the credit card company accepted my fraud report and canceled all charges.

If you find yourself with identity theft problems, you will discover that fixing the problem can take a lot of time and effort. Banks and other lenders may not believe you and will pursue collection. The fraudulent accounts in your name may be sold to collection agencies who don’t care that you are alleging identity theft. You may find yourself with lawsuits, endless collection calls and damaged credit.

Bankruptcy as an Option to Address Identity Theft Debts

You may decide to use bankruptcy as the tool to address identity theft problems. Bankruptcy may be an attractive option if you have other, legitimate, debts that you need to deal with as well.

When you file bankruptcy, you will force all of your creditors – both legitimate and those arising from identity theft – to deal with you at one place and at one time. If your case goes through to discharge, you will be forever clear of creditor claims.

On the other hand, your creditors have the right to object to either the discharge of a specific debt or to your bankruptcy as a whole. These types of objections are rare but if the amount at issue is large, creditors will file objections.

If you find yourself facing bankruptcy objections you will have to incur the cost of paying a lawyer to defend you. This may seem very unfair but if a creditor initiates bankruptcy litigation you need to respond.

Always File Police Reports if Your Identity has been Stolen

My experience has been that you can avoid finding yourself in litigation by taking proactive and documented steps to report the identity theft and to file police reports for every instance of identity theft. You cannot sit back and assume that just because you did nothing wrong, you won’t end up owing money.

If a creditor’s lawyer contacts me prior to filing a bankruptcy objection and I can provide that lawyer with copies of police reports, letters to creditors and credit bureaus and other evidence that you are not at fault, there is a much better chance that the creditor’s attorney will recognize that he is likely to lose his objection to your bankruptcy and that he will advise his client to back down.

If you have been a victim of identity theft and think bankruptcy might be an option to deal with this problem, please reach out to me – I’d be happy to help.

Additional Reading:

How to Request a Credit Freeze from the Credit Bureaus

About Jonathan

Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.

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