Open Book Bankruptcy Records Opens Door To Fraud
In today's electronic age, it is easy to learn of someone's financial habits simply by searching bankruptcy records available online. While meant as a warning to potential creditors or business investors about a person's 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 person's 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 person's 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 considerably higher than loans for people without the stigma of a bankruptcy on their record.
Open Records Add To Embarrassment
For many, bankruptcy become the only option when their financial obligations exceed their ability to pay and there appears to be no other choice but to start over again. A court can release a person from debt with the hope they will use it as a learning experience to get their financial house back in order. The court maintains bankruptcy records on every person or business, which will be open for any curious person to review.
Not only are the bankruptcy records designed to be warning for others against future dealings, they are meant to be an embarrassing reminder to the debtor that they need to pay their 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 and the bankruptcy records are a part of that embarrassment. Knowing they are open to friends, relatives and employers may prevent all but those without absolutely no recourse from filing for bankruptcy. While individuals see this as a violation of their privacy, the unpaid creditors claim they lost their privacy when they quit paying their bills.