All the studies confirm what I already knew from more than twenty years as an Indiana bankruptcy attorney: Most people who file bankruptcy have suffered an illness, a job loss, an accident, a divorce, or other catastrophic event, and what they generally aren’t is compulsive gamblers or shoppers running up frivolous debt. There’s been lots of press about job losses and foreclosures and how those relate to Indiana’s rising number of bankruptcies. One aspect of the situation, though, that’s not gotten nearly enough coverage is the tie-in between bankruptcy and identity theft.

Identity theft is the use of another person’s information in some way involving fraud and deception. Not only is this type of crime an increasing problem in and of itself, a significant number of identity theft cases relate to bankruptcy cases. To understand this, it’s important you know that laws about debt and bankruptcy apply to any debt, including debt incurred through theft of someone’s identity. At first blush, you might wonder why anyone would even want to steal the identity of a person who’s filing bankruptcy – after all, their credit is no good! So the second thing you need to understand is that in most cases bankruptcy actually improves one’s credit, to the point that credit offers flood in, making the debtor an ideal target for identity theft!

Bankruptcy-related identity theft doesn’t need to mean stealing a credit card or other ID and using that to open a telephone account, buy clothes, furniture, or gadgets, or, worse yet, drugs. The Executive Office for U.S. Trustees in Washington, D.C. reports cases where people bought real estate using stolen identities, or transferred part ownership in property to a bankrupt person to stave off foreclosure – the different permutations seem endless. The Executive Office handled one case where a five year old boy was served papers directing him to attend a creditors’ meeting for his bankruptcy, and another where an employee obtained a professional license using someone else’s identity and then later filed bankruptcy in the name of the identity theft victim!

Clearly, we all need to be vigilant about our information, being very cautious about giving out our Social Security numbers and carrying around credit cards, not to mention periodically checking credit reports. When a bankruptcy proceeding is involved, there’s all the greater need for a watchful eye. In a worst-case scenario, discharges of debts that have been granted by the bankruptcy court can be revoked, and the burden of setting the record straight falls on the debtor. This is just one more important reason to seek the advice of an experienced bankruptcy attorney. The U.S. Trustee staff is not allowed to offer assistance to victims of identity theft. When I work with bankruptcy clients, one aspect of my work is to gather and submit all the necessary legal documents in such a way that their information is protected. This is crucial, since, as part of the process in a typical bankruptcy, the financial information filed with the court becomes a matter of public record (with the exception of the Social Security number).

The bankruptcy court system, as I emphasized in Getting On Track After – Or Before – Bankruptcy, serves as a safety net for individuals and business owners, enabling them to make a fresh start. As I help my clients rebuild their finances after bankruptcy, “Look to the future and protect your identity” is definitely the motto we adopt.