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Identity theft and bankruptcy
Identity theft is not a valid excuse for exemption
Identity theft victims will be held responsible for debt incurred by others under changes in the Federal bankruptcy code. If you are a victim of identity theft, read on to see what you need to know.
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Identity theft victims will have to repay under new bankruptcy law
Identity theft can be avoided. Here’s how.
Congress, with the overwhelming support of members of both parties, recently passed the most sweeping bankruptcy reform legislation in twenty five years. The oddly-named Bankruptcy Abuse Prevention and Consumer Protection Act was written in order to eliminate the so-called “bankruptcy of convenience.” According to proponents of the bill, most Americans who file for personal bankruptcy do so because they have problems with drugs, gambling or compulsive shopping and they simply wish to avoid paying their bills. Traditionally, those filing for personal bankruptcy could file using Chapter 7 of the Federal bankruptcy code, which wipes clean all outstanding debt and allows the debtor to make a “fresh start.” The new legislation will require most debtors to file under Chapter 13, which requires a court-approved five year repayment plan. This legislation was passed despite evidence that most bankruptcy filers are troubled by job loss, sudden illness or some other personal tragedy, and are not just irresponsible spenders.
A little-publicized provision of the new bill states that even victims of identity theft are bound by the terms of the new law. If your credit card or driver’s license is stolen, and some other person uses them to pose as you while running up thousands of dollars worth of debt that you know nothing about, you will be held responsible and you will have to repay the debt. Identity theft has been a growing problem during the last ten years, but this change to Federal law should cause anyone to take concern.
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A determined thief can probably get away with anything, but a few simple steps might help avoid an identity theft catastrophe:
- Shred all of your documents regularly. Many thieves make a habit of digging through dumpsters and trash, seeking documents that will help them steal an identity. Shred any financial documents before throwing them away. Most any office supply store will stock an inexpensive document shredder, and they’re worht the money.
- Do not provide your Social Security number to anyone unless it is absolutely necessary. When the Social Security system was first designed in the 1930’s, Congress did not intend for the numbers assigned to each participant to become a de facto national identity number. Over time, however, they have become just that. With your Social Security number, thieves can access your credit report as well as other personal information. Your Social Security number is precious. Protect it carefully.
- Carry as few credit cards as necessary. If you are leaving the house and you only expect to use one credit card, then only take one with you. Carrying fifteen credit cards that you don’t need increases your vulnerability should your wallet be lost or stolen.
- Check your credit report at least once a year and look out for unusual or suspicious activity. The average victim of identity theft takes nearly a year to find out. Be diligent, and you may catch a thief in his tracks.
- Never provide personal information, such as your date of birth, driver’s license number or Social Security number over the telephone to someone you do not know.
These few steps can protect you from tens of thousands of dollars in potential losses through identity theft. Remember, the new bankruptcy law will require you to pay all debts incurred through identity theft. Be diligent, and protect your identity.
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