Washington,
D.C.
Office of Research and Planning
PRESS RELEASE
For Immediate Release
January 3, 2002
PERSONAL
BANKRUPTCY FILERS WILL BE REQUIRED
TO
SHOW PROOF OF I.D., BASED ON RESULTS OF PILOT STUDY
WASHINGTON,
D.C.-Every individual filing a personal bankruptcy case under
Chapter 7 or Chapter 13 will soon be required to show proof
of identification, based upon the findings of a six-month
pilot program conducted by the United States Trustee Program.
The
new requirement will start to be phased in across the country
in January 2002, it was announced today by Martha Davis, Acting
Director of the Executive Office for United States Trustees
(EOUST). The EOUST is the Washington, D.C., office of the
U.S. Trustee Program, a Justice Department component that
works to ensure the integrity of the bankruptcy system and
intervenes in court to enforce the bankruptcy laws.
The
Debtor Identification Pilot Program ran in 18 judicial districts
for the first half of 2001. According to a report issued by
the EOUST, the pilot program found inaccurate names or social
security numbers (SSN) in 1,225 Chapter 7 and Chapter 13 cases-about
one percent of the pilot cases. Just over 80 percent of the
inaccuracies were due to typographical errors such as transposition
of digits in an SSN, but the rest involved questionable names,
questionable identity documents, or possible misuse or falsification
of SSNs.
The
22-page report plus appendices were posted on the U.S. Trustee
Program's website at http://www.usdoj.gov/ust/otherinitiatives/debtorid/report.html
on Dec. 28, 2001.
Expanding
the report's findings nationwide, the EOUST estimates that
nearly 13,000 of the Chapter 7 and Chapter 13 personal bankruptcy
cases filed during the year ending June 30, 2001, may have
contained identity and SSN errors. Further, there may be more
than 15,000 identity and SSN errors in 2002 if filings rise
as predicted and debtors' identities are not verified.
During
the pilot project, participating U.S. Trustee offices took
enforcement actions to correct the bankruptcy court record,
and to pursue civil and criminal remedies where further investigation
suggested the intentional use of an inaccurate name or SSN.
The U.S. Trustees' actions included efforts to help innocent
victims whose credit reports could be affected by a bankruptcy
filer's inadvertent or intentional use of the victim's name
or SSN.
"The
pilot program was successful in confirming each consumer debtor's
identity and social security number, ensuring a more accurate
court record, and protecting the credit reports of innocent
persons from being affected by the use of incorrect social
security numbers in bankruptcy," Davis concluded in the report.
"More importantly, the pilot demonstrates that there are a
significant number of problems regarding misidentified debtors
and incorrect social security numbers but that most of these
problems can be addressed by implementing relatively simple
procedures."
Combating
Identity Fraud and Protecting Victims
"A
primary goal of the pilot project was to determine whether
instances of misidentified bankruptcy filers and incorrect
SSNs were widespread, and to ascertain how often such instances
constituted intentional identity fraud," Davis noted.
As
with identity fraud in general, reports of identity theft
in bankruptcy are on the rise. On Nov. 15, 2001, the U.S.
Attorney for the Northern District of Illinois announced charges
of identity theft in bankruptcy against four defendants; on
Oct. 31, 2001, the U.S. Attorney for the Central District
of California included eight identity theft defendants among
those charged with bankruptcy crimes in 2001.
A
common reason for intentionally filing for bankruptcy under
a false name or SSN is to obtain the protection of the "automatic
stay" to delay foreclosure or eviction, without placing a
bankruptcy on one's own record. Another reason to file for
bankruptcy under a false name or SSN is to evade payment of,
and to discharge, debts incurred under the false name or SSN.
The
EOUST report cites a number of cases of apparent identity
fraud or misuse of SSNs. In one case, a bankruptcy filer stated
that for 12 years he used a purchased SSN on his payroll deduction
forms, tax forms, medicaid benefit application, and credit
applications, as well as on his bankruptcy petition. The purchased
SSN matched the correct SSN of an innocent third party, interfering
with her attempts to refinance her home loan and to complete
a rollover of her 401(k) plan. Moreover, the U.S. Trustee's
office discovered yet another name associated with the same
SSN, suggesting that the SSN may have been sold to more than
one person.
Other
instances cited in the report include a bankruptcy filer's
long-time use of his son's SSN without the son's knowledge,
and an apparent "fractional interest" scheme in which the
bankruptcy filer transferred real estate interests to fictitious
individuals and then filed for bankruptcy under the fictitious
names to delay foreclosure on the properties.
Aside
from fraud, innocent mistakes on a bankruptcy petition can
also create problems of misidentified debtors or cause a bankruptcy
filing to be reported on the wrong person's credit record.
The debtor identity pilot program explored various procedures
designed to ensure that the bankruptcy court record is corrected
in case of error and the appropriate parties notified. To
assist innocent victims whose credit reports could be affected
by the use of an incorrect name or SSN on a bankruptcy petition,
the EOUST and the pilot offices worked with a national credit
reporting trade association and representatives of three major
credit reporting agencies to establish protocols and national
points of contact for reporting errors.
Required
Documents
The
identification procedures tested during the pilot program
will start to be implemented in all judicial districts in
January 2002. Actual implementation dates may vary by judicial
district.
Individuals
filing for personal bankruptcy under Chapter 7 or Chapter
13 will be required to provide proof of identity and SSN when
they appear at the statutorily mandated Section 341 meeting
of creditors to discuss their financial obligations.
Permissible forms
of identification include a valid state driver's license,
government-issued picture identification card, U.S. passport,
or legal resident alien card. Proof of SSN may be provided
through documents such as a driver's license, Social Security
card, current W-2 Form, or payroll check stub. Other forms
of identification or proof of SSN may be accepted in the discretion
of the U.S. Trustee or the private trustee appointed to administer
the case.
Summary
of Pilot Program Findings
The
study involved 127,590 consumer Chapter 7 and Chapter 13 cases
filed in 18 judicial districts from January 1, 2001, through
June 30, 2001-accounting for about 17 percent of cases filed
nationwide during that period.
The
study found 1,229 debtor identification and SSN problems in
1,225 cases, or about one percent of the pilot cases filed.
Of
the 1,229 problems, 1006 (81.9 percent) were due to typographical
errors such as transposition of digits in an SSN, but 191
(15.5 percent) involved questionable names or identity documents,
and 32 (2.6 percent) involved possible misuse or falsification
of SSNs.
The
participating U.S. Trustee offices took action in 1,122 cases
and achieved 1,039 favorable outcomes, including 875 amended
(corrected) bankruptcy petitions filed by debtors or their
counsel, 22 bankruptcy cases dismissed, and one Chapter 13
reorganization plan denied. Some matters were still pending
at the end of the pilot program's reporting period.
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