What if a business bounces a check?

What if a business bounces a check?

On Behalf of | Feb 27, 2023 | Collections

Using checks to pay for goods and services is less common than it once was. People now often use various electronic methods, ranging from debit cards to credit cards to Venmo or PayPal. However, businesses will still often use checks for B2B transactions. The reasons vary, but checks leave an easily verified paper trail and have a standard format for remittance advice.

Businesses will deposit the check as part of their usual banking practices. Unfortunately, they may later find that the check was not accepted due to insufficient funds. The first step is to pick up the phone and call them and address the shortcoming, perhaps using a business credit card instead. Remember to add in any bank fees incurred. The issue could be related to a mix-up at the bank or trouble with the customer’s deposit intended to cover the check.

Ideally, this issue is an easily addressed accounting glitch. In reality, a business’s bounced checks can be a red flag that prompts creditors to take action.

The laws regarding checks

There are several options for dealing with a bad check. Intentionally writing a bad check is a crime, but pressing criminal charges may be counterproductive and local authorities will very rarely pursue such charges. Instead, the creditor should send a demand letter requesting payment on the outstanding balance and bank fees. If the debtor does not pay the money within 30 days, the creditor can file a lawsuit.

If the amount is more than $10,000, the debtor can file the suit with the civil division of the superior court. Filing a lawsuit enables the creditor to recover the debt, damages, and interest.

Collecting large debts can require legal assistance

As with any legal action involving large amounts of money, it is advisable to work with an attorney who can represent the client’s interests. They can help build a strong case for the client, but it may be necessary to take additional legal action to collect on the debt and damages after winning the case. A collection attorney can identify assets and the appropriate legal tools to get their client’s money.