What to do When You receive a Bad Check

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What to do When You receive a Bad Check

By Stephen Bucaro

As a small business operator, personal checks may be one
method to receive payment for your goods or services. As a
way to receive payment, a personal check is actually better
than credit cards because the fees are less and there can
be no charge back.

Fortunately, most people are honest and studious in taking
care of their checking account. But sooner or later every
small business operator will receive a bad check. The
first thing to do is politely contact the individual and
give them an opportunity to make the check good.

Most times you'll find that the customer has simply been
careless with their checking account or finances. They
will probably be embarrassed about the incident and will
immediately replace the check with a good one.
Unfortunately, there are rare occasions when the individual
who gave you the bad check decides to make themselves
scarce.

Note: If a personal check is for more than a few dollars,
it's best to let the check clear before delivering the
product or service. Say, for example, that someone wants
to buy your car with a personal check for twice what the
car's worth. Remember, a check is just a piece of paper
until after it clears. They can return to pick up the car
after the check clears, or you can offer to drive with the
individual to their bank to get the cash.

There are three reasons why a personal check may not clear:
"insufficient funds", "account closed", or "stop payment".
The proper action to take depends upon why the check didn't
clear. If the check is returned for "insufficient funds",
and you can't locate the individual who wrote the check,
file a crime report at your local police station. If a
police investigator can locate the individual who passed
the bad check, that individual will be required to pay you
and/or spend some time behind bars.

If the check was returned "account closed", you may have a
criminal case depending upon when the account was closed.
If the account was closed before the date the check was
written, you definitely have a criminal case. If the
account was closed afer the check was written, the court
may determine that you didn't present the check for payment
in a timely manner. In that case, you have a civil matter,
not a criminal complaint.

If the check was returned because of a "stop payment", you
have a civil matter. Some people try to save time and work
by filing a crime report for ANY check that doesn't clear.
This can result in the individual who gave you the check
being arrested. They may miss work and encounter a host of
other problems as a result of your FALSE crime report.

I said FALSE crime report, because an individual who puts
a stop payment order on a check almost always does so
because of dissatisfaction with a product or service. The
accused individual is now in a position to countersue for
the problems caused as a result of your FALSE crime report.
This could end up costing you a lot more than the value of
the check.

Sooner or later every small business operator will receive
a bad check. The first thing to do is politely contact the
individual and give them the opportunity to make the check
good. If that doesn't work, many people try to save time
and work by filing a crime report regardless of why the
check didn't clear. It's very important to determine why a
check didn't clear before deciding on a course of action.

Disclaimer: Stephen Bucaro is not engaged in rendering
medical, legal, accounting or other professional service.
If legal advice or other expert assistance is required,
the services of a competent professional person should be
sought.

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