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Identity theft and bankruptcy: Important things to know

With our smartphones always on hand, we can access anything at any time. However, as technology advances, so do methods of identity theft. Scammers invent new ways to steal someone's identity and spend their money constantly. They use viruses, credit card scanners and even widespread data breaches.

If you find yourself to be the victim of identity theft, it can be frightening to realize the financial damage that someone did to your life. Although you are not responsible for the debt incurred by identity theft, it can be difficult to remove from your record.

It was not you, but creditors may still demand payment

Anyone who has suffered from identity theft understands the pain and frustration it causes. Suddenly, they are in significant debt. They did not spend the money, but every purchase was in their name.

And since the debts are in your name, the creditors call you. If so, it might take great lengths just to prove to the collection agencies that it was not you.

Reporting the theft is critical, but it does not remove debt

You have a right to file an Identity Theft Report with the Federal Trade Commission if someone steals your identity. This should:

  • Stop creditors from contacting and harassing you
  • Place fraud alerts on your accounts and credit reports
  • Help dispute any false information on your credit reports

This is an important step because it notifies the government and financial agencies of the identity theft. Usually, filing a report ensures that you are not held responsible for the debts incurred. 

Unfortunately, if law enforcement does not find the person who stole your identity, it can be difficult to prove it was not you. 

Filing bankruptcy can be an option for victims of identity theft

Many people often see bankruptcy as a last resort for finding debt relief. However, if identity theft has severely damaged your finances, filing Chapter 7 bankruptcy can help you make a fresh start. Bankruptcy can discharge debt from identity theft, as well as:

  • Eliminate credit card debt
  • Stop foreclosure actions if you cannot make home loan payments
  • Officially stop creditor harassment with the automatic stay

If identity theft has negatively impacted your finances and credit score, it may be beneficial to consider filing bankruptcy to help remove the stress of those debts from your shoulders.

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