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The Link Between Bankruptcy & Identity Fraud

Jun 26, 2008
In todays electronic age, it is easy to learn of someones financial habits simply by searching bankruptcy records available online. While meant as a warning to potential creditors or business investors about a persons personal financial history, the open book of bankruptcy records also places them at risk for potential identity fraud.

When a person files for bankruptcy, whether Chapter 7 or 13 for personal bankruptcy or Chapter 11 for business reorganization, every part of bankruptcy records become open to the public as a public record. Following a bankruptcy there is a waiting period of several years before that person can file again, credit may be attainable and some fraudsters will use the information in the bankruptcy records to take out loans in that persons name.

While many claim this lack of privacy is a hindrance to the bankrupt, other say that when they failed to meet their financial obligations, they gave up their right to privacy.

Additionally, the persons bankruptcy records will become part of their financial history, affecting their credit report for several years, influencing the interest rate they must pay on future loans that will be considerably higher than loans for people without the stigma of a bankruptcy on their record.

Embarrassment

For many, bankruptcy becomes the only option when their financial obligations exceed their ability to pay. There appears to be no other choice but to start over again. Although the court can release a person from debt in the hope that they will use it as a learning experience to get their finances back in order, bankruptcy records on every person or business that have filed a claim are kept for ten years, during which time it is open for any curious person to view.

Bankruptcy records are not only designed to be a warning to others against future dealings, they are also meant to be an embarrassing reminder to the debtor that s/he needs to pay bills on time. Even though in recent years the stigma of bankruptcy records has not been as severe to those going through the process, it can still create personal embarrassment.

It is this level of embarrassment that many creditors see as retribution for failure to pay the bills. The fact that bankruptcy records are available for friends, relatives, and employers to view may prevent all but those without absolutely no recourse from filing for bankruptcy. While many individuals who file for bankruptcy believe their open records is a violation of their privacy, the unpaid creditors claim they lost their privacy when the debtors quit paying their bills.
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