Filing for bankruptcy is a last resort for those struggling with debt. It is a difficult decision to make, and this choice subsequently drops your credit rating with a resounding crash. There is relief in the fact that creditors are no longer banging at the door, but they are quickly replaced by a different kind of predator. There are several fraudulent credit repair companies peddling scams that will promise a clean slate, taking advantage of those desperate to escape bad credit.
The most important thing on your list right now is repairing your credit, and although quick fixes such as file segregation sound great, they are definitely too good to be true. File segregation is the practice of creating a new consumer credit file by applying for an Employer Identification Number. This number is then used on applications in place of your social security number, essentially falsifying your personal information. The fact that it is illegal puts a damper on things.
These scams often target those who have filed for bankruptcy. They claim that you will not have access to any line of credit, such as credit cards and loans, for the next ten years, and they promise to hide adverse credit information. For a fee, this supposed credit repair company will tuck away your bankruptcy and provide you with new information to use on applications. You might also be asked to use a different mailing address. If there weren’t red flags flying up before, they definitely should be at this point.
As if bankruptcy wasn’t bad enough, falling for this scam could make matters so much worse. If you happen to miss the warning signs, you will have committed a federal crime, and it is possible that you will be prosecuted. However, you also have rights to fight against the company that committed fraud. It is against the law for any credit repair company to provide services without clarification, and they are not within their rights to accept payment beforehand, even if what they were doing was legal.
People responsible for file segregation scams will do everything they can to convince you of your credit inadequacy and their own legality, but both claims are completely false. Yes, your credit is damaged, but you can still recover from bankruptcy. Of course you will not be approved for all credit lines, but you will still have options once you show that you are stable financially. The fast track to credit repair is tempting, but you are better off with a diligent payment plan and frugal spending habits.