When a Check Is Bad
Checks can be bad for several reasons:
- The issuer, known in legal terminology as the drawer, does not have enough money in the account to cover the check. The check will then come back to you stamped “Insufficient Funds.” The exception is when the drawer has overdraft protection, which guarantees payment of the check.
- The account may be closed, or it may be fictitious and never have existed.
- The drawer can stop payment on the check. He can do so without giving a reason – he simply calls the bank and asks it not to honor the check. The bank charges a fee for stopping a check.
- The drawer’s signature is forged, so the bank will refuse payment. Sometimes bank employees fail to notice the difference between the forged signature and the signature card in the customer’s file, and the check goes through.
- In the case of a check signed over to you (a third-party check), the endorsement is forged.
- The person who signed a business check is not authorized by the company to do so.
The risk of accepting checks from strangers is so high that many retailers (stores) simply don’t accept them. But if a company provides services or sells to businesses, checks are an everyday matter. Moreover, the bank does not deduct a fee from checks, as it does with credit cards.
How to Avoid Rubber Checks
Here are a few simple rules that will help increase your chances of getting paid. These rules are intended mainly for businesspeople, but also for private individuals.
- Require the customer to fill out and sign the check in your presence.
- Don’t accept checks drawn on banks in other, distant states (out-of-state banks).
- Make sure the customer’s name and local address are printed on the check.
- Don’t accept checks written for more than the sale price. In other words – don’t give change for a check.
- Don’t accept third-party checks signed over to you, such as paychecks, Social Security benefit checks, etc.
- Don’t accept post-dated checks.
- When accepting a check, ask for a photo ID with an address, for example a driver’s license. Write the ID number and the customer’s phone number on the check, if your state’s law allows it.
Stores and other retail businesses check the reliability of checks through check verification services, which collect information about dishonest payers. Before accepting a check, the cashier electronically verifies the customer’s ability to pay with such a service, which then guarantees the transaction. If the customer’s check bounces, the store sends it to the service, which tries to collect the amount due.
What the Law Says
Writing a bad check gives rise to both civil and criminal liability for the drawer, governed by state law. For example, New Jersey law requires a person who wrote a bad check to pay you the value of the check plus liquidated damages of $100 or three times the value of the check (whichever is greater), but not more than $500 above the value of the check.
In New York State, a drawer who does not pay within 30 days of the second demand for payment faces damages of up to twice the value of the check, but not more than $400 (for insufficient funds) or $750 (when the account does not exist). The drawer does not pay these damages if the check was used to pay rent or utility bills (electricity, gas, etc.).
In all states, knowingly writing bad checks is a crime. The penalty usually depends on the amount of the check. In New Jersey, a check under $200 is a disorderly persons offense, a check from $200 to under $1,000 is a fourth-degree crime, a check for $1,000 or more is a third-degree crime, and from $75,000 even a second-degree crime. In Florida, a bounced check under $150 is treated as a misdemeanor, and from $150 – as a felony.
What to Do
Call the person who wrote the check (the drawer). Be careful, however, about how, when and where you call, because state laws protect the rights of debtors. To be safe, call between 8 a.m. and 9 p.m. and don’t threaten violence or public humiliation, because that is illegal.
Write a demand letter requesting payment and send it by certified mail, return receipt requested. You can demand full payment plus coverage of bank fees.
Contact the bank. After a few days, call the bank and ask whether there are now sufficient funds to cover the check. Say that you have a customer’s check for a certain amount and want to know whether there is enough money in the payer’s account. If possible, go to the bank in person and cash it. Another option is so-called “enforced collection.” If the bank offers this service, it will hold the check in a special category and the first amount deposited into the account will go to you. Ask the bank for details.
If the debtor stubbornly refuses to pay, you have to prepare for court proceedings. The rules for collecting on bad checks vary from state to state, but here are the most common legal requirements.
The check must be presented for payment at least twice (it must bear two NSF – nonsufficient funds – stamps on the back).
You must notify the issuer in writing that the check bounced, by certified mail, return receipt requested (twice in some jurisdictions, for example in New York). This is called a “demand of payment.” You must document the damages you suffered.
Check your state’s requirements. Once you meet them, you can turn to the authorities for help.
Who Can Help
The police
Intentionally writing a bad check is a crime in every US state, and as such it is a matter for the district attorney or the police department. Unfortunately, the degree to which the authorities get involved varies. In some areas, the authorities have efficient bad check programs: they quickly contact the person who wrote the bad check, who usually pays to avoid a formal investigation. Unfortunately, in many areas the police and prosecutors are slow to help, because they don’t want to act as a collection agency. Before you seek help, you must have proof that you sent a demand of payment.
Small claims court
To get a formal court judgment for payment, you have to go to court. Small claims courts are best, provided the amount you are claiming does not exceed the limit in that court – limits vary by state and by court, and the current amount is posted on your state courts’ website. You don’t need a lawyer there. With a court judgment, you can collect the amount due from the debtor’s bank account or wages, provided, of course, that you know his bank. The e-book “Jak wygrać sprawę w Small Claims Court” (“How to Win a Case in Small Claims Court”) can help you (www.PoradnikSukces.com).
Collection agency
With small amounts, the time lost on small claims court may be too much trouble and ultimately not worth it. In that case it is worth hiring a debt collector, even though it will keep a sizable share of the amount due as its commission. Many collection agencies have programs called NSF Check Recovery.
You can read about collection agencies in the book “Życie od nowa: Jak uporządkować sprawy w urzędach” (“Life Anew: How to Sort Out Problems with Government Offices”) (see pp. 336–340).
A stubborn debtor may continue to avoid paying back the money even though the court ruled in your favor. In that situation you must tell the sheriff (marshal) where the debtor works or keeps money, so the sheriff can collect it.
Writing bad checks can have a negative effect on our check-writing history, which sometimes has consequences even more serious than a blemish on our credit history. But that is a different topic.
Elżbieta Baumgartner
Elżbieta Baumgartner is the publisher and author of many advice books, including “Jak chować pieniądze przed fiskusem” (“How to Hide Money from the Taxman”), “Jak działa giełda” (“How the Stock Market Works”) and “Jak inwestować w fundusze powiernicze” (“How to Invest in Mutual Funds”). 255 Park Lane, Douglaston, NY 11363, tel. 718-224-3492, www.PoradnikSukces.com
Updated October 2026.
