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Dealing with Bad Check Headaches

Posted by: Rod Kurtz on May 19, 2009

If you get a bad check from a customer, here are some tips on how to collect:

Call the Customer. Call the customer and ask that he or she either write a new check for the amount owed or send you a cash payment. Call during normal business hours, don’t discuss the debt with the customer’s employer, and make sure your tone of voice remains polite throughout your conversation with the debtor. Don’t threaten to publicize the debtor’s name or notify the debtor’s employer. Threats could constitute harassment or extortion and are illegal.

Write a Letter. Send a certified letter, return receipt requested, making the same request that you made over the phone. Keep a copy of the letter, which can help in a criminal prosecution if the check-writer intentionally attempted to defraud you.

Contact the Customer’s Bank. If the customer’s bank account is still active, wait a few days and then call the bank to determine if there are sufficient funds. Explain that you’re holding a check for a certain amount and ask if there are enough funds in the account to cover it; normally, banks are able to provide you with this information. If there are now sufficient funds to cover the check, take the returned check to the bank and draw out the cash.

You can also ask the customer’s bank for "enforced collection." If the bank offers this service, it will make sure that the next deposit in the customer’s account is transferred to you. The procedures and costs of using such services vary. Obtain details from the bank directly.

Request Prosecution. Intentionally writing a bad check is a crime. Note, however, that many states require you to send a written notice to the debtor before she may be prosecuted. Thus Step 2 on this list! Your police department or district attorney can tell you if written notice is required, and what information the notice should contain.

Use Small Claims Court. Contact your county or municipal court for more information.

You should take all of the above steps quickly, as many states have a two-year statute of limitations to collect on debts for bad checks.

Elizabeth Milito
Senior Executive Counsel
NFIB Small Business Legal Center

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