At the point when a borrower initiates a Chapter 7 bankruptcy case, they are required to disclose to the court regarding all liabilities. Included in the liabilities/obligations are any returned checks. A returned check occurs when a check is sent back to the issuing bank typically because the individual or entity who wrote the check does not have enough money in the account. Most people call that a bad check. You get a Not Sufficient Funds (NSF) notice when a bad check is rejected. Absent proof of fraud by the debtor, bad checks are dischargeable in bankruptcy.
A Quick Overview of Chapter 7 Bankruptcy:
Not long after a Chapter 7 case starts, the court appoints a trustee to oversee the case. Every single nonexempt item of value is under the authority of the trustee who takes it for payment among the creditors who file claims in your case. After the trustee pays claims, then all unpaid debts are discharged at the conclusion of the case. A discharge absolves the debtor of all personal responsibility to pay the debt included. Personal responsibility is key to remember because secured creditors such as mortgage companies or auto loan companies are all犀利士 owed to go after the house or car even if there is discharge. Mortgage companies can foreclose and car companies can impound for unpaid loans.
Bankruptcy and Returned Checks:
Now and again individuals with use checks to make a purchase that later bounces. How many times has an entity waited so long to cash your check that either other bills were deducted from the account or your balance was too low and bam you have an overdraft?
Or in the occasional case, the person receiving the check waits so long that by the time they attempt to cash the check you are now banking with a different bank altogether. The latter just happened in one of my chapter 7 cases. The debtor wrote a check years before that apparently was not deposited for months. By the time the creditor deposited the check, she had stopped using that account. She was not contacted about the bad check until several months after her case was discharged. It created a headache after the discharge and the debt collectors were persistent. The debt collectors were notified of the bankruptcy case and discharged to stop the collection efforts.
It is clear that unpaid checks establish an obligation that can be discharged in a Chapter 7. The person or entity you paid with the bad check is a creditor in your case and can file a claim.
In addition, creditors can object to the dischargeability of a particular debt. With bad checks, creditors would have to prove fraud or you intentionally wrote a bad check. It is a high standard to meet. In addition, the amounts are often small such that creditors cannot justify the cost of objecting to the discharge which requires a filing with the court and a hearing.
This applies to paper checks as well as electronic payments such as pre-authorized debits from your account. Checks are going by the wayside as more people use online banking and with it comes online bill pay. If your account does not have enough to cover all the debits scheduled you will get a NSF. This too is dischargeable.
For answers to all bankruptcy questions feel free to reach out by calling or text Githuku Law at 410-849-9529.
