Prosecuting Bad Checks

“Can I prosecute someone if they give me a bad check?” The answer is…it depends. For starters, it depends on which state you live in. In a few states it is not a crime to write a bad check. But in most states you do have recourse, although the penalties vary.

The Bad Check laws are not written to punish someone because they cannot pay your bill; they’re written to protect you from fraud. Let me explain. If someone contacts you and you provide a service and they bounce a check, you may have recourse. But if they contact you and they give you a postdated check, saying “Hold this check until next Monday” and you agree, then you cannot prosecute the check. The reason is because they have put you on notice that they do not have the money. You can still sue them, and it will be much easier to win because the postdated check is a promissory note, but you cannot have them prosecuted.

There are a few states that have some very nice protection on the books when it comes to Bad Checks. Florida has a “3 times the damages” rule; we have gotten 3 times the face amount of the check for clients in a few cases. In most states, however, you get only the face amount of the check plus the cost of collection.

One notable thing about a Bad Check is that it can be an early warning sign to you that your client may have an issue. If a client ever bounces a check and they give you the explanation that it was a bank error, ask them to supply a letter from the bank so you can have it for their file. (Let me say that mistakes can happen at the bank, and on occasion deposits do not get posted. If a bank makes a mistake, however, they will supply a letter to your client stating it was a banking error.) If the client will not/does not supply one, assume the truth is that they did not have the money to cover the check. Be vigilant in watching that client very closely, and do not let their balance grow; the bounced check is certainly a sign that they are having cash-flow issues.

I categorize a bad check-writer into one of two distinct groups.

1. The first is an honest person working through issues.
2. The second is a Con-man who bounces checks on a regular basis, using their checking account like a line of credit.

The easily recognized difference is that the honest person will pick up the phone and call you. He will admit to having an issue and will agree to do this or that. The Con-man will not call you and will intentionally avoid your calls.

A word of action in closing. NEVER take a partial payment on a bad check. If you do, you have forfeited your right to prosecute the check (in most states). You can still sue them for the balance, but you cannot have them picked up.