Bad Check Collection

As an owner of a business, there is a pretty good chance that at some time or another a customer will pass you a bad check. When you bring it to the bank you find you can't cash it because the customer does not have enough funds to cover the amount of the check. Now you have to come up with a way of bad check collection. Passing a bad check is a crime for which the customer can be prosecuted. Quite often the cost of trying to collect the funds in this manner is a lot more than the amount of the check, so it is not worth bothering with. However, for large amounts of money, you do need to file charges in order to recover the money.

What Should I Do If I Recieve a Bad Check?

You should contact the person by telephone to tell them the check bounced and that you need to receive some other method of payment. Sometimes, this is just an honest mistake on the part of the customer and they will pay you the money right away. However, there are cases, where the customer knew there was no money there to cover the check when they wrote it.

In order to start proceedings for bad check collection, there are certain things that you must do. First of all, you have to make sure that you tried to cash the check within 30 days after you received it. Within 90 days of having the check returned to you, you have to mail a certified letter to the person who issued the check demanding payment of the money. You should allow about thirteen days to get the receipt that the customer has received your letter, but you don't really need to have this receipt before you file charges.

Make copies of the check, front and back, as well as copies of the letter you sent out, the envelope and the receipt that the customer received the letter. Keep a record of all correspondence that you have with the customer. If the check is less than $5000, you can file charges in a civil court or you may be able to handle it through Small Claims Court.

How Can a Collection Agency Help Me?

There are bad check collection agencies that will do all the work for you in contacting the person and sending out the letters demanding payment. If you wish to proceed through the court, then the collection agency will also get this process started for you as well.

Most people don't realize that passing a check for which they have insufficient funds is against the law. A creditor or bank does not have to run the check through the account twice and be rejected each time. A charge is imposed on both the person bringing the check to the bank and the person who writes the check. When you file for recovery of the money you lose through the bad check, you also have to include the penalty the bank charges. If you have a lot of checks returned over the course of a year and do not try to recover the fees you have to pay as a result, this can also cost you a lot of money.