My Rights When Receiving a Bad Check
If a bank refuses to honor a check because the check writer closed the account or lacks sufficient funds to cover the item, then you have a bad check. Federal laws offer you no protection in the event that you receive a bad check. However, state laws do provide you with some recourse, and in many instances you can take legal action against the check writer.
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Bad Checks
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Many people unwittingly write bad checks because they misjudge the amount of money that they have in their account or because they write a check against funds that have not yet posted. Therefore, always contact the writer of a bad check because an innocent mistake may have caused the check to bounce as opposed to a willful act of fraud. In many states, you have to send a letter demanding full payment of the debt before you can begin legal proceedings against the check writer. Keep a copy of any such correspondence on file as you may need it during any subsequent legal proceedings.
Valid Checks
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If the check writer fails to settle the debt, you can begin legal proceedings, but only if the check meets your state's definition of a valid check. You cannot press charges against someone who wrote you an incomplete check that does not contain a payee name, the date or the check writer's signature. You cannot sue someone for writing a postdated check that bounces and you cannot press charges against someone in your state if they wrote you a bad check drawn from a bank in another state. Therefore, always make sure that you only accept valid checks otherwise you may have no recourse if the checks bounce.
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Check Diversion
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Many states, including California and Oregon, have check diversion programs. These programs are usually operated at the county level by the local sheriff's department. You can file a complaint at the check diversion office and the department must contact the check writer and demand payment of the debt. The check writer must pay you the amount of the check and in some states diversion programs can also require the check writer to pay you some form of damages. In California, damages can amount to $1,500. If you have access to a check diversion program, you can avoid a lengthy criminal prosecution case.
Court Action
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If the check writer fails to settle the matter through the diversion program or if you have no access to such a program in your area, you must file a complaint with the district attorney's office. The DA investigates your claim and can file criminal charges against the check writer. Depending on the amount of the check, in some states such as Florida and Oregon, writing a bad check is a felony. Penalties range from suspension of a driver's license to fines and prison time. A judge can award you damages at the conclusion of the trial, but if the check writer lacks the means to settle the debt, you may end up with nothing.
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