Bankruptcy, Bad Checks, Discharge and Criminal Liability

What happens if prior to filing for bankruptcy, the debtor gives a bad check to someone?  A bad check, Not Sufficient Funds check, or a bounced check, is usually a check which the bank will not pay because there is either no such checking account or there are insufficient funds in the account to pay the check.  In New York, writing a bad check is a misdemeanor, punishable up to 90 days in jail for the first offense.  To be charged criminally for issuing a bad check usually means that the check was issued with knowledge that it would not be paid by the bank.  If you file for bankruptcy and have bad checks outstanding it might make your bankruptcy case more complicated.  For the most part, bad check debts are dischargeable in bankruptcy, but each case is unique.

Sometimes, while the debt may be listed in the bankruptcy petition, the debtor may be charged criminally.  The bankruptcy filing, and the automatic stay associated with it, will not stop a criminal prosecution.  The automatic stay prevents any attempts to collect a debt from you which extends to creditors holding or collecting on that check. Although the automatic stay blocks all collection actions by the creditors, it  does not extend to proceedings by the State or any Federal governmental agency pursuant to its police powers.  More specifically, any criminal prosecutions which enforce criminal laws are not subject to the automatic stay of bankruptcy.  The Bankruptcy Court treats prosecutions of bad checks as criminal proceedings and not attempts to collect debt as long as the actual purpose of a bad check prosecution is to enforce criminal bad check laws.  Since a bad check prosecution isn’t meant to pressure the debtor into paying a debt that could otherwise be discharged in a bankruptcy the automatic stay of bankruptcy will have no effect on bad check prosecutions which enforce criminal law.  If the debtor is found guilty of a crime of passing a bad check, the debtor may be liable for civil restitution, which is not likely to be found dischargeable by the bankruptcy court.

If no criminal charges are filed, the situation becomes clearer.  The debt associated with a bad check is likely to be dischargeable, but its dischargeability will depend on whether there was any fraud, false pretenses, or material misrepresentations made in the actual writing of the check.  If there was no fraud or misrepresentations involved, then the debt from the bad check is usually dischargeable.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

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