by 
The Curious Bag
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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.
Effects
All 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 Agencies
Some 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 Others have knowingly attempted to collect false or outdated debts.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 Fraud
Bankruptcy fraud is particularly harmful to creditors. When someone charges up a credit card and then quickly files bankruptcy, this could be constituted as a fraudulent debt and lead to possible criminal sanctions as well as denial of the bankruptcy claim.
Basic Rights
Anyone who believes they are victim of any fraudulent debt scheme should contact the police as well as the major credit reporting agencies Equifax, Experian and TransUnion.
Time Frame
It can take an average of 25 hours for an identity theft victim to resolve the fraudulent debt situation, according to the Privacy Rights Clearinghouse.
Source:
New York Times: Lawsuit Charges "Sewer Service" Fraud By New York Debt Collectors
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