What Is Fraudulent Debt?
Fraudulent debts can hurt both consumers and creditors. There are a number of possible ways that someone can create a fraudulent debt, ranging from identity theft to dishonest collection agency practices. Identity theft is a common cause of fraudulent debt and occurs when someone steals the personal information of another individual and takes out accounts using that data, according to the Federal Trade Commission.EffectsAll negative debt claims, unless proved fraudulent, can be reported on a person’s credit for up to seven years, according to the Fair Credit Reporting Act.Collection AgenciesSome collection agency representatives have lied on court affidavits to win default lawsuit judgments against debtors. Others have knowingly attempted to collect false or outdated debts.Bankruptcy FraudBankruptcy fraud is particularly harmful to creditors.