(Part 2 of a 2 Part Series on Dealing with Identity Theft for Cleared Professionals)
In part 1 of this series I discussed what to do if you are confronted during the security clearance process with delinquent, fraudulent accounts on your credit report. This is a common problem, and one that many security clearance applicants fail to adequately address because they don’t understand their legal recourses or are too overwhelmed to exercise them. The unfortunate result is frequently a security clearance denial due to a lack of evidence supporting the clearance holder’s claims. An old legal maxim dictates that those who sleep on their rights often lose them.
In part 2 of this series, I will examine a particular, little known, and increasingly common sub-issue that clearance holders are confronting: bankruptcy identity theft.
If you’ve never heard of bankruptcy identity theft – or can’t understand why in the world anyone would go to the trouble of fraudulently declaring bankruptcy in someone else’s name – you’re not alone. Frankly, it was something I had little knowledge of until it became an issue in a recent security clearance case.
Bankruptcy Identity Theft: A Sneaky Way to Stave Off Foreclosure
As it turns out, bankruptcy identity theft is quite the cottage industry. Essentially what happens is this: someone who is facing foreclosure or repossession files a bankruptcy in someone else’s name, falsely declaring that the unwitting victim has an ownership interest in the property at issue. That forces the lender to temporarily stop foreclosure or repossession proceedings and allows the thief to stave off eviction or repossession long enough to either hide the property (e.g. cars, boats, etc.) from the lender or find somewhere else to live. The fraud is sometimes perpetrated by an ex-spouse of the victim, who files the bankruptcy as though the couple were still married. Other times, the thief is a complete stranger.
Regardless of who files the fraudulent bankruptcy, it usually doesn’t take more than a few months for the bankruptcy to be dismissed by the federal court – often after the thief fails to show up for a mandatory meeting with creditors. But the damage is already done to the unwitting victim: the bankruptcy is now a public record that appears on the victim’s credit report.
If you are a victim of bankruptcy identity theft, follow the steps I outlined in Part 1 of this series, but also be sure to contact the United States Trustee in your area (the component of the U.S. Department of Justice that represents the government in bankruptcy filings) to file a report. If you get lucky, they may be willing to file on your behalf for an expungement of the bankruptcy. Unfortunately, they are not always willing to do so; their mission is to root out systemic fraud and abuse in the bankruptcy system, not individual cases unrelated to a broader pattern (e.g. those filed by a vindictive ex-spouse). If the U.S. Trustee is unwilling to take your case, you will need to be prepared to hire a private bankruptcy attorney to file for an expungement. You should also consider contacting the FBI, as bankruptcy identity theft is a federal crime they investigate.
To read more about this fascinating, bizarre, and increasingly common form of identity theft, check out this Department of Justice Report For an even more in-depth analysis, see, “‘What Do You Mean, I Filed Bankruptcy?’ or How the Law Allows a Perfect Stranger to Purchase an Automatic Stay in Your Name,” Maureen Tighe (United States Trustee for Region 16) and Emily Rosenblum, 32 Loyola of Los Angeles Law Review 1009 (June 1999).
This article is intended as general information only and should not be construed as legal advice. Consult an attorney regarding your specific situation.
