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Getting A New Id Is A Bad Idea
By lar
In the file segregation scheme, you are promised a chance to hide unfavorable information by establishing a new identity. That may sound perfect, especially if youre afraid that you wont get any as long as bankruptcy appears on your record.

The problem: File segregation is illegal. If you use it, you could face fines or even a prison sentence.

The Pitch: A New Identity

If you have filed for bankruptcy, you may receive a letter from a repair company that warns you about your inability to get cards, personal loans, or any other types of for 10 years. For a fee, the company promises to help you hide your bankruptcy and establish a new identity to use when you apply for credit. These companies also make pitches in classified ads, on radio and TV, and even over the Internet.

If you pay the fee and sign up for the service, you may be directed to apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Typically, EINs which resemble Social Security numbers are used by businesses to report financial information to the IRS and the Social Security Administration.

After you receive your EIN, the repair service will tell you to use it in place of your Social Security number when you apply for credit. Theyll also tell you to use a new mailing address and some references.

The Catch: False Claims

To convince you to establish a new identity, the repair service is likely to make a variety of false claims. Listen carefully; these false claims, along with the pitch for getting a new identity, should alert you to the possibility of fraud. Youll probably hear:

Claim 1: You will not be able to get for 10 years (the period of time bankruptcy information may stay on your record).

Each creditor has its own criteria for granting credit. While one may reject your application because of a bankruptcy, another may grant you shortly after you filed for bankruptcy or successfully completed a bankruptcy repayment plan. And, given a new reliable payment record, your chances of getting will probably increase as time passes.

Claim 2: The company or file segregation program is affiliated with the federal government.

The federal government does not support or work with companies that
offer such programs.

Claim 2: The file segregation program is legal

It is a federal crime to make any false statements on a loan or application. The repair company may advise you to do just that. It is a federal crime to misrepresent your Social Security number. It also is a federal crime to obtain an EIN from the IRS under false pretenses. Further, you could be charged with mail or wire fraud if you use the mail or the telephone to apply for and provide false information. Worse yet, file segregation likely would constitute civil fraud under many state laws.

Rights Under The Repair Organizations Act

This law prohibits false claims about repair and makes it illegal for these operations to charge you until they have performed their services. It requires these companies to tell you about your legal rights. repair companies must provide this in a written contract that also spells out just what services are to be performed, how long it will take to achieve results, the total cost, and any guarantees that are offered. Under the law, these contracts also must explain that consumers have three days to cancel at no charge.

Under the law, you also have the right to sue in federal court. The law allows you to seek either your actual losses or the amount you paid the company whichever is more. You also can seek punitive damages: sums of money to punish the company for violating the law. The law also allows class actions in federal court: cases where groups of consumers join together in one lawsuit. If you win, the other side has to pay your attorneys fees.

Many states have laws regulating repair companies, and may be helpful if youve lost money to repair scams.

If youve had a problem with a repair company, report the company. Contact your local consumer affairs office or your state attorney general (AG). Many AGs have toll-free consumer hotlines. Check with your local directory assistance.

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