Burned by bad check? Fight back

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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 experience.

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.

Your options

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 claims court.

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 check.

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.

One hitch is that small claims courts have limited jurisdictions. If you accepted a check from someone in another state, you may find that you’ll have to go to a higher court to sue.

“You could get a judgment in your state, but now you have to bring that judgment to the person who wrote the check. You have to take it to the state where that person is located and get a court in that state to enter the judgment,” says Gerry Goldsholle, an attorney, former prosecutor and founder of Advice Company.

“So, now the local sheriff or marshal exercises attachment or levies powers against the person’s property in that state. But you’ll have to pay sheriff’s fees; now you’re out a lot of money.”

And that’s the rub: You could soon incur more costs than the original debt. Somewhere along the line you may have to decide whether it’s worth continuing. If the amount owed is large enough, you may want to consider hiring an attorney or a collection agency to handle the situation for you.

Your local government may help

Another option, if you’re lucky enough to have one in your area, is a state or district attorney’s check-recovery unit. These offices vary in the depth of services they perform, but some are very aggressive and take a huge amount of the workload off the victim’s shoulders.

In Mobile, Ala., the Mobile County check-enforcement unit operates out of the district attorney’s office. Bad-check writers are given a chance to settle up, but perpetrators who don’t cooperate could be arrested, according to spokeswoman Debra Powell.

“A lot of people don’t make the distinction that this is a crime. We tell them there’s a warrant for their arrest and give them five days to come in. We try to work with them as long as we don’t consider them a predator. But if they’re evasive, we’ll go after them. We’ll find them at work or dropping their kids off at school.”

Powell says the victim is expected to send a certified letter to the check writer. If the check writer fails to respond, the victim can come to the check recovery unit and start the process.

“We enter the check into our computer and create a warrant and an affidavit. Then we take the victim and the paperwork to a magistrate where the victim swears the claim is true and correct. Everything is placed in a court file and we then send a letter to the check writer. We give them five days to respond.

“If they come in, they have to pay the face amount of the check plus a $30 fee to the victim. They also have to pay us a $94 warrant fee. If they don’t come in, we go after them. If they’re supposed to show up for any other court — traffic court, divorce court — we’re there waiting to arrest them.”

Powell says her unit collected over $2 million in the past year.

Limit the payment options

The obvious lesson in all of this is to not accept personal checks. But for people dealing locally with one another or sometimes even out of state, it understandably can be easier to use a check, but it’s not wiser.

A seller isn’t likely to wait until the check clears before taking delivery of the merchandise. John Hall of the ABA says you can’t call a bank and ask if there are adequate funds to cover the check because privacy laws would prevent them from giving you that information.

According to the ABA, only about 1 percent of all checks bounce. But some 40 billion checks are written every year, so that’s about 400 million checks that bounce. You can lessen your chance of becoming a victim and avoid the hassle and expense of taking someone to court by requesting that buyers pay you by money order, certified check or a money transfer by Western Union.

You could even use services such as PayPal and Escrow.com, which are frequently employed by people who buy and sell over the Internet. This is very much a situation where an ounce of prevention is worth a pound of cure.