Have you written bad checks and need to file for bankruptcy? Maybe you’re facing a foreclosure, a repossession, or a judgment on a credit card lawsuit is about to be entered against you, and, you have no other options to prevent any of these things from happening except to file for bankruptcy. After careful consideration, you’ve finally convinced yourself that bankruptcy is the best way to deal with your debt. Your only hesitation is that you have used some “creative financing” by way of writing checks. You might have written checks to payday loan companies to try to make ends meet, or have some outstanding checks wrote to the grocery store for food, the pharmacy for your child’s medication, or whatever the case may be, but when its all said and done these are considered “Bad Checks”. Since you are going to file bankruptcy to save your property, you want to know what will happen with those Bad Checks when you file for bankruptcy.
“Bad Checks” also known as Hot Checks, Dishonored Checks, NSF Checks, Bounced Checks, Worthless Checks, Bogus Checks, False Checks or Rubber Checks are all names that often refer to checks that a bank will not honor or pay due to there being insufficient funds in the maker’s account to pay the check. Checks can also be considered a “Bad” if there is no such checking account, or a stop payment was put on the check when there was never any money in the account to begin with. No matter what name they go by, and for whatever reason they aren’t paid, they are considered “Bad Checks” if issued and not honored.
Depending on what state you live in, and what the local laws are where you live, the writing of a Bad Check is an unlawful act which can have both civil and criminal penalties. Writing a Bad Check can be a crime and it could be punishable with a substantial fine or even jail time. Depending on the amount of the bad check written, a person can be prosecuted for a misdemeanor or even a felony. Also, depending on the type of Bad Check offense in your state and the number of offenses committed, the potential criminal penalties for bad checks can range from a $50.00 fine to a $10,000.00 fine with possible jail time of up to 10 years. In some states, the holder of bad check may charge the obligor with any additional processing fees allowed by law which can be up to three times the amount of the check.
So what happens to someone who has written a Bad Check and then files for Bankruptcy? Well the short answer is that it will not protect them from criminal prosecution, nor will it discharge their criminal liability for any restitution, costs or fines associated with the criminal prosecution or restitution. If you have to file for bankruptcy and there are hot checks outstanding, it can definitely make your bankruptcy case a bit more complicated. That being said, for the most part bad check debt is dischargeable in bankruptcy, but since every case is unique, you should obtain legal advice from a bankruptcy attorney in your area before filing bankruptcy.
When you file bankruptcy, your creditors, which include any parties holding a bad check, are prevented from taking any actions to collect from you. The Automatics Stay of bankruptcy automatically stops most legal actions and collections against you. Even so, filing for bankruptcy will not stop criminal prosecutions against you. So, if you have written any bad checks, the party to whom you wrote a bad check to could request to have you arrested and criminally prosecuted for a bad check. Even though that can happen, that scenario is rarely seen in bankruptcy, but it does occasionally happen.
As for the discharging (or eliminating) the Bad Check debt in a bankruptcy, there is no way to determine what the Bankruptcy Court will do to interpret the facts of any issue. However, Bankruptcy Courts have examined various things in prior cases to determine whether a bad check is dischargeable or not. Some of the questions and issues that Bankruptcy Courts have examined in order to determine bad check dischargeability are:
Was there an agreement to hold a post-dated check?
How much time was there between issuance of the check and the bankruptcy filing?
Did the person writing the check get legal advice from a lawyer about bankruptcy before they wrote the check?
How many bad checks were written and included in the bankruptcy filing?
What were the amounts of the bad checks?
What was the person’s financial condition when the check was delivered?
Were there multiple checks delivered the same day?
Did the person filing bankruptcy have employment when the bad check was written?
Was the check written off of a closed account?
What was the financial sophistication of the person?
Were the checks written for life necessities or were luxury items purchased?
What it all comes down to is that every case is different, so the facts of each case will dictate whether a bad check will be treated as dischargeable or nondischargeable. Generally, so long as there wasn’t any fraud, false pretenses, or material misrepresentations made or conveyed in the actual writing of the check or checks, then the “debt” part of the bad check(s) is quite often dischargeable. In a bankruptcy case, the creditor or party holding the bad check has the burden of proof to show the Bankruptcy Court fraud, bad intent, or false representation by the debtor. So going on a bad check writing spree days or weeks before filing for bankruptcy filing could make it difficult to discharge such debt. On the other hand, if you made a mistake in your checkbook and a $15.00 check to the grocery store bounced, or you postdated a check to a payday loan company last year, could make for the items to be discharged, but again every case is unique.
Don’t go it alone. When you need to file for bankruptcy and have checks out there that may be considered nondischargeable, it is important to get legal advice before filing. An experienced bankruptcy attorney in your area can explain your options to address Bad Checks in Bankruptcy.
Copyright: Copyright © 2008 RJ Atkinson LLP – Attorneys At Law
About the Author:
Rogena Jan Atkinson of The Law Offices of RJ Atkinson,LLP, (rjabankruptcy.com) is a bankruptcy lawyer & foreclosure attorney who has stopped thousands of foreclosures with bankruptcy. Visit www.rjabankruptcy.com to learn more about foreclosure and bankruptcy.