Identity Theft Ruined My Finances – Is Bankruptcy the Answer?

Identity theft is, unfortunately, a growing problem. In 2023, the Federal Trade Commission (FTC) received more than 1 million identity theft complaints. Total losses exceeded $10 billion.

If you have been a victim of identity theft, you may wonder about your next steps. Do you call the police? What about your bank? Should you file for bankruptcy?

Bankruptcy can be an attractive option if you have a lot of fraudulent charges that you are having trouble getting reimbursed for as well as significant debt of your own. Some financial institutions are quick and eager to recover your stolen funds, while others won’t believe you and will pursue collection actions, harassing you with letters, phone calls, and even lawsuits.

As a victim of identity theft, filing for bankruptcy can provide you with a fresh start by wiping away most debts. However, there are downsides to consider, such as the negative effects of bankruptcy on your credit score. A poor credit score makes it difficult to get loans, so if a new car or home is in your future, you may have to wait close to a decade.

Filing for bankruptcy due to identity theft is generally not the best first option. If fraudulent accounts or debts were opened in your name, you should dispute them with the creditors and credit bureaus rather than taking responsibility for them through bankruptcy. Work with a bankruptcy lawyer first so they can assess your case and help you understand your options.

Before filing for bankruptcy, take these steps first:

• Close affected accounts or cards. Contact your bank and credit card companies to report the fraud and close compromised accounts. Request new account numbers and cards.
• Report the identity theft. Contact your local law enforcement agency to file a police report and document the crime.
• Place a fraud alert and freeze your credit. Contact one of the three major credit bureaus (Experian, Equifax, or TransUnion) to place a fraud alert on your file. This makes it harder for thieves to open new accounts. Consider a credit freeze, which prevents any new credit accounts from being opened in your name.
• Review and dispute fraudulent accounts. Obtain your credit reports for free at com. Identify unauthorized accounts and transactions. Dispute fraudulent charges with the credit bureaus and creditors in writing.

●       Consider legal action. If creditors refuse to remove fraudulent debt, you may need legal assistance. The Fair Credit Reporting Act (FCRA) and Fair Debt Collection Practices Act (FDCPA) protect you from being held responsible for identity theft-related debts.

●       Change Passwords & Secure Your Accounts

○       Update passwords for banking, email, and other sensitive accounts.

○       Enable two-factor authentication (2FA) where possible.

●       Watch for Signs of Ongoing Fraud

○       Keep an eye on bills, mail, and unexpected credit inquiries.

○       Consider signing up for identity theft protection services.

●       Consider Bankruptcy if the Debt is Overwhelming

○       If identity theft has left you with insurmountable debt that you cannot dispute or recover from, bankruptcy may be an option.

○       Consult a bankruptcy attorney to explore whether filing is the right choice for you.

Being a victim of identity theft is a frustrating experience. You could have many accounts compromised, resulting in fraudulent charges that can ruin your finances and credit.

In Maryland, The Law Offices of Adam M. Freiman can help you understand your options. Protect your credit and future with help from a legal bankruptcy expert.