Talk about adding insult to injury. If you deposit a bad check into
your bank account, you've lost that money, plus there's a good chance
the bank or credit union will whack you with a fee -- maybe $15,
$25 or more.
Why? Because you're in the best position to determine
if the person you accepted the check from is a good risk, says John
Hall, spokesman for American Bankers Association.
"The bank has never met this person and has no
relationship with them. You are liable because you decided to accept
a check from this person."
With an increasing number of consumers selling personal
items or services to other individuals, it's certain that more and
more people will find themselves stuck with an occasional bad check.
Businesses generally have more clout and financial wherewithal to
deal with bad checks; for consumers, it can be a much more trying
Not only will you be stuck with the bounced check
and possibly a "deposit item returned" fee; your bank
might charge you with nonsufficient-funds fees if any checks you
wrote bounced because you didn't have as much money in your account
as you thought.
If accepting bounced checks isn't a habit, you should
explain the situation to your bank and see if they'll waive the
fees. But the main job ahead of you is recovering the money owed
to you by the bad-check writer.
The first thing to do is call the check writer and ask that they
come up with the money. It may have been an innocent mistake that
can be made right with an apology and a payment.
If that's not the case, then check with your state
attorney general's office because bad-check law varies from state
to state, and you may find that you have options other than small
Most states require that you send the check writer
a certified letter. Ask that the money be paid by money order or
certified check. You can also request to be reimbursed for the bad-check
charge imposed by your bank. Some states require the check writer
to respond within 10 days; others allow 30 days.
If the check writer doesn't respond or refuses to
pay, you can go to small claims court. The clerk's office will give
you instructions for how to proceed. You'll need to bring evidence
-- the original bounced check, a copy of the certified letter you
sent to the check writer, any responses you received from the check
writer and a bank statement that shows a fee for depositing a rubber
Small claims courts generally limit losses to up to
$2,500 or $3,000, but some go as high as $5,000. The clerk's office
can tell you what damages you can recover in addition to the original
amount of the bounced check plus court fees. In some states you
can sue the person for up to three times the amount of the check.
You're also entitled to interest if the debt is paid over time.
But suing someone and actually getting your money
back are two different things, says Lynn Goldberg, vice president
of New York-based National Credit Systems.
"Suing someone is a real quagmire. You can go
through the justice system, sue, get your day in court and win a
judgment. The problem is the judgment is nothing more than a piece
of paper. There's always the problem of getting the money. An individual
executing a judgment, well, it's something the average person just
doesn't know how to do."
Don't be discouraged; a lot of defendants pay up when
the judgment is made. But if the culprit doesn't pay within a stipulated
time, usually 20 to 30 days, you can go back to court and try another
avenue such as wage garnishment or a lien against property. Judgments
are usually good for about 10 years and can be renewed, so you have
a long time to recover the money.
Keep in mind, the defendant has the right to appeal
and doesn't have to pay anything during the appeal process.