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FAQ'S

Bad Checks and Bankruptcy

1. How are bad checks treated in the bankruptcy process?

A “bad check” is also known as a dishonored check, a NSF check, a bounced check,  a worthless check, a bogus check, a false check or a rubber check are all of the names that refer to a check that the bank will not honor or pay because there are insufficient funds in the maker’s account to pay the check. A check can also be considered to be bad check if there is no such checking account, or a stop payment may have been put on the check when there was never any money in the account to begin with. Writing a bad check is an unlawful act and it has has both civil and criminal penalties. In New Jersey writing a bad check is a crime and it could be punishable with a substantial fine or even jail time.

2. What is the status of the law in New Jersey about the issuance of bad checks?

According to New Jersey law the cashing a bad check means a person tries to pass a check knowing that there isn’t enough money in the account to cover the amount of the check. A person can be said to have known about the lack of funds if the account was closed prior to the check, or if the person who wrote the check doesn’t fix the overdrawn balance of the account within 10 days after receiving notice. See, N.J.S.A. 2C:21-5

If you find yourself arrested or charged with writing a bad check in New Jersey, then you should understand that there is help out there for you. If you made a simple mistake, or made a bad judgment at a seemingly desperate time, that doesn’t mean you deserve a harsh punishment or a permanent criminal record. Yet that is what you are facing if you don’t have an attorney to help fight for you, and is there to protect your interests.If you are unfairly accused, I am fully prepared to fight the charges, to investigate the case, and challenge any alleged evidence the state has against you. The bottom line is that bad checks cases can be beaten, or the charges can be reduced in many cases. If they can’t prove under the law that you intended to defraud a person by passing a bad check, you should be found not guilty.

3. Is cashing a bad check a big deal?

Although cashing a bad check may not have seemed like it was a very big deal at the time, if you are ultimately convicted of a bad check charge then it can be very harmful to your future. I have assisted many people fight bad check charges. Alternatively, I have helped these debtors negotiate an advantageous plea deal so that these charges wouldn’t destroy their futures. If you call me for a free consultation I can help you too! I will review your individual case and determine what is the best way to proceed to get you the best outcome possible. Moreover, we can also discuss whether bankruptcy is a viable option for you to consider.

4. What are the penalties for bad checks under New Jersey Criminal Code?

In New Jersey writing a bad check is a misdemeanor or it can be considered a felony depending on the amount of the bad check, and the circumstances of the issuance of the check. No matter how nominal you think the check is, you can still be charged with a crime. If you file for bankruptcy and have bad checks outstanding then it might make your bankruptcy case much more complicated. In the majority of cases, a bad check debt is dischargeable in a bankruptcy. However, if you still refuse to make good on the bad check, then you can still be prosecuted under the New Jersey Criminal Code, and you can ultimately receive a criminal record.

If the amount of the check was less than $200 it is a disorderly person’s offense which can result in up to six months jail, a fine of up to $1,000, restitution in the amount of the bad check(s), community service and/or probation.

* If the amount of the bad check was between $200 and $999 it is a fourth degree charge which could result in up to 18 months in prison.

* If the amount of the bad check was between $1,000 and $74,999 it is a third degree charge which could result in up to 5 years in prison.

* If the amount of the bad check was $75,000 or more it is a second degree charge which could result in up to 10 years in prison.

If you have any prior criminal history, that can play an important role in the sentence you would receive if you are convicted of a bad check charge. It’s important that you give me the chance to look at your specific case so I can help you determine your exposure and advise you of what your next steps should be.

It is a crime in New Jersey to write a check without the money in your account to honor the check, plain and simple. If you have problems with your direct deposit, or if you have confusion as to when you’d receive a payment from someone else, or any other explanation for an NSF check, this explanation won’t get you anywhere. Even worse, any bad check for more than $200 can be charged as a felony.

When a person who has written a bad check files for bankruptcy, it will not protect them from any criminal prosecution. Moreover, it will not discharge their criminal liability for any restitution, their costs and fines associated with the criminal prosecution and restitution.

Additionally, a person who has written a bad check can still be arrested, notwithstanding the pending the bankruptcy. The automatic stay does not extend to matters of criminal prosecution. The automatic stay also does stop the collection efforts of a non-governmental party who you may have written bad check to, but not their right to proceed to the County Prosecutor’s office and file a criminal complaint. Simply put, if you have written a bad check, then the party to whom you wrote the bad check can still have you arrested and criminally prosecuted if you, regardless of whether you have filed for bankruptcy or not. In summary, the filing of bankruptcy will not stop any criminal prosecution for a bad check charge. However, the underlying debt for the bad check will be discharged. The discharge in a bankruptcy does permit certain unsecured debts to be discharged in chapter 7 and bad checks are considered one of them. A chapter 13 can also discharge bad checks but it’s usually not advisable. In a chapter 13 case bad checks can be repaid as part of a repayment plan. Yet again, it must be emphasized that the filing of a chapter 13 does not stop a criminal prosecution for a bad check even though your plan may include repayment in full.

5. If I file for bankruptcy will it stop a prosecution for my bad check charge?

No. If the bad check charge is pursued by a prosecutor, and if the amount of the bad check is of a sufficient amount, then the respective prosecutor will not stop any prosecution for a bad check charge even if you for bankruptcy. However, the prosecutor will advise the “victim” who has received the bad check that their debt is unenforceable, and that the best outcome is to give the debtor a criminal record for writing the bad check.

When a bankruptcy case is filed federal law imposes the automatic stay. The automatic stay is an injunction against all collection actions. Furthermore, it bars any further collection efforts on debts that arose prior to the bankruptcy filing. This automatic stay is one of the primary reasons why most people file for bankruptcy. Although the automatic stay is a very powerful part of federal bankruptcy law, the automatic stay does not extend to criminal proceedings filed by a Municipal Court or by any local Criminal Court. More specifically, any criminal prosecutions that attempt to enforce any criminal laws are not subject to the automatic stay provisions of the bankruptcy code. The bankruptcy court treats the prosecutions of bad checks as a criminal proceeding, and not as an attempt to collect debt. However, the actual purpose of a bad check prosecution must be to enforce the criminal bad check laws. Therefore, since a bad check prosecution isn’t meant to pressure the debtor into paying a debt that would otherwise be discharged in a bankruptcy, the automatic stay will not stop a bad check prosecutions to enforce any criminal law.

6. I have written postdated checks to several payday loan companies over the last year. Due to my financial situation I was recently forced to file for bankruptcy. Can this “loan shark” still come after me for criminally charges for the bad checks, or sue me in a civil court?

No. The payday loan shark does not have the legal authority to charge you with any type of criminal charge. Only the Municipal Court or the County Prosecutor can charge you with criminal charges. They can however refer your case to the local Municipal Court or to the County Prosecutor. Whether or not that happens, this depends on the particular facts of your case. As for filing a law suit they could file a civil complaint against you in the bankruptcy court, and it is called an adversary proceeding. if the want to attempt to lift the stay. They would have to file a special case in the bankruptcy court to lift the automatic stay. In the more than one thousand cases that I have filed I have never seen this happen.

7. I have wrote a postdated check to a payday loan shark. If I file for bankruptcy can they still deposit the check after I file?

Yes, but if they deposit the check after they receive a notice of the bankruptcy filing, then  this action could be construed to be a violation of the automatic stay. It is not uncommon for checks to be processed after a bankruptcy filing. Many auto drafts and other similar ACH debits can still go through if the money is there. Therefore, you should pay careful attention to your your bank accounts. If you file for bankruptcy, then it is important that all of your creditors receive the proper notice of your filing. Despite the fact that the automatic stay stops collection actions, your bank account can still be deposit and debit any outstanding checks. These checks can still be processed even if your creditors aren’t properly noticed. Although you may receive your money back at some point if the creditor wrongfully takes the money from you, it will still take a significant amount of time. Whenever you post-date a check you are  representing that the check will be honored on that date. If you write a post-dated check to a payday loan company or anyone else, and then later file for bankruptcy, then it will ultimately end up in the bankruptcy court if that debt is included on the petition.

The bankruptcy court will then have to sort through the facts, and then consider whether there was an agreement between you and the payday loan company or other party to hold the postdated check. The bankruptcy court will also have to consider other factors as well. The primary factor is whether or not you ever intended to pay on the postdated check. Obviously if the day or weeks before filing bankruptcy you went on a check writing spree to payday loan companies, knowing that there were no funds in your account and that you would be filing for bankruptcy, then the bankruptcy court could get the impression that you never “intended” to make good on the checks. Generally, it all comes down to what was your specific intent when you made your representations. If your intent was to make good on a postdated check when you issued it, then it may be difficult for a payday loan company to prove you never intended to pay. This is especially true if you have previously had an ongoing relationship, or have gotten caught up in the payday loan cycle for the months or years preceding a bankruptcy filing. The whole payday loan business is predicated on postdated checks, so they have the burden as potential creditors in your bankruptcy case to prove your intent.  If you misrepresent or fraudulently made a statement(s) to induce a party to accept your postdated check, then you could have problems discharging the debt in bankruptcy. Everyone’s situation is unique so it is always good advice to seek the legal advice of competent bankruptcy lawyer.

8. If I file for bankruptcy can I discharge the underlying debt owed for any bad checks that I wrote?

Every case is different so the facts of each case will dictate if a bad check can be discharged. Generally, as long as there wasn’t any fraud, false pretenses, or material misrepresentations made or conveyed in the actual writing of the check(s), then the debt component from the bad check(s) is almost always dischargeable. Nonetheless, if a debtor goes on a bad check writing spree days or weeks before filing for bankruptcy filing, then this could make it very difficult to discharge such debts. These actions could be considered to be made in bad faith, and also be considered to be “abuse and neglect” of the bankruptcy process.

The bankruptcy code doesn’t allow you to discharge any debts incurred or obtained by fraud, misrepresentation, or false pretenses. Where the bad checks are concerned it depends on the circumstances. Obviously if, for example, you had been doing business with a payday loan company for the 6 months prior to bankruptcy, and if you didn’t have money in your account for 3 months,  then wrote a check for $1000, and filed bankruptcy the next week, it would be very difficult to prove that your actions weren’t fraudulent. Therefore, when an irate creditor comes to bankruptcy court where the creditor is holding the check issued by the debtor that was dishonored, the expectation may be that the debt is not dischargeable. However, in the vast majority of the cases the underlying debt based on a bad check is dischargeable. To succeed in getting a bankruptcy court to find a bad check debt is non-dischargeable, the creditor has the burden of proof to prove fraud or false representation by the debtor.

9. How will the bankruptcy court decide if the bad checks I include in a bankruptcy case will be discharged?

Since every situation is different, there is no way to determine what the bankruptcy court will do to interpret the facts of any issue. However, the bankruptcy courts have examined various aspects of prior cases to determine whether a bad check is dischargeable or not. Some of the aspects that a bankruptcy court have examined to determine whether bad checks are dischargeable are as follows:

a. Whether there was an agreement to hold a post-dated check.

b. The time between the delivery of the check and the bankruptcy filing.

c. Did the person issuing the check obtain legal advice from an attorney about bankruptcy before writing the check.

d. How many bad checks were written and included in the bankruptcy.

e. The amount or amounts of the bad checks.

f. The debtor’s financial condition at delivery of the check.

g. Whether multiple checks were delivered the same day

h. Whether the person filing was employed when the bad check was written.

i. Whether the check was written on a closed account.

j. The financial sophistication of the debtor.

k. Whether life necessities or luxury items were purchased.

10. I have wrote a hot check for $30 to Shop Rite. Can Shop Rite file criminal charges against me even if I file for bankruptcy?

Certainly they can. They could contact the local Municipal Court or the County Prosecutor and file a criminal complaint against you. However, I handled more than one thousand bankruptcy cases, and my clients have rarely had problems with bad checks less than $300. The reason for this is due to the length of time and the aggravation involved with pursuing criminal charges, especially when the person who wrote the bad check has just filed bankruptcy. I have seen very angry holders of bad checks occasionally show up at creditors meetings. Since writing a bad check in any amount is a crime, I always advise all on my bankruptcy clients to pay anyone who may be holding a bad check.

11. I have to file chapter 13 case to stop a foreclosure, but I have about $1000 in bad checks out. Can I repay the checks in my bankruptcy and avoid any criminal charges?

There is no way to be certain. It may be possible to include the repayment for the bad checks in the chapter 13 case. However, it is the local prosecutor’s decision to charge you with any crime. The local prosecutor has the authority to decide whether you will be charged with a crime regardless whether you include the debt  in a chapter 13 plan or not.

When you file for a bankruptcy, your creditors, which include any parties holding a bad check, are prevented from taking any attempts to collect from you. The automatic stay automatically stops most legal actions against you, but filing bankruptcy will not stop criminal prosecutions against you. Therefore, if you have written bad checks, then the party to whom you wrote a bad check to could request to have you arrested and criminally prosecuted for a bad check. When a person who has written a bad check files for bankruptcy, it will not protect them from any criminal prosecution. Furthermore it will not discharge their criminal liability for any restitution, costs and fines associated with the criminal prosecution and restitution.