Are Debts From Identity Theft Dischargeable?

According to the Bureau of Justice Statistics, about 16.6 million people were victims of identity theft in 2012. In addition to ruined credit, victims are often subjected to calls from creditors and collection agencies attempting to squeeze money from them, even though the companies may have been informed that the accounts were opened fraudulently. Luckily, you can eliminate debt related to identity theft by filing chapter 7 bankruptcy. However, there are a few reasons why you may not want to go that route.

Creditors are Obligated to Remove Fraudulent Accounts

The Fair Credit Reporting Act requires creditors to remove accounts from your credit reports upon being notified those accounts were opened fraudulently. After being told the debt is the result of identity theft, neither creditors nor debt collectors can report the debt to the credit bureau if they haven't already done so.

Additionally, you are not responsible for paying any debt that arose out of the fraud, and debt collectors are required to stop contacting you about the debt once you send them notice that you no longer want to hear from them.

You May Be Letting the Perpetrator Off the Hook

According to some statistics, about 32 percent of identity theft was perpetrated by a family member and another 18 percent was conducted by friends, acquaintances, or other in the individuals' social circle.

Often, this close association makes it emotionally difficult for victims to press charges against the perpetrators. However, when bankruptcy is on the table, the victim may be even less inclined to blow the whistle because filing chapter 7 bankruptcy doesn't necessitate filing a police report to get relief from debt collection calls. On the other hand, disputing fraudulent accounts with creditors and credit reporting agencies does require you to turn the matter over to the police.

By choosing to file bankruptcy, you will essentially be letting the perpetrator get away with his or her crime. It may also make it very difficult to collect compensation for damages in the future if you file for bankruptcy, since doing so requires you to accept responsibility for the debt.

You May Be Making Your Credit Worse

As noted previously, you can have fraudulent debts removed from your credit report by notifying creditors and credit reporting agencies about the identity theft. If you file bankruptcy, however, that black mark will stay on your report for up to ten years, affecting your ability to qualify for new credit in the future or even some job opportunities.

Although it can be frustrating dealing with the fallout of having your identity stolen, filing bankruptcy may not be the answer. However, if you think you want to go this route, speak to a bankruptcy attorney about your options. For more information, contact Anthony Inserra Attorney at Law or a similar legal professional..

Share