Discharging Bad Checks In Bankruptcy
There are generally two types of “bad checks.” The first type is the kind that is “payable on demand” meaning that it is expected that the bank will honor the check when it is presented. This is the most common type of bad check. When you write a check that the recipient believes is “payable on demand,” and the check is returned for Non-Sufficient Funds (NSF), you may have committed a criminal act. Depending on the amount of the bad check written, a person can be prosecuted for a misdemeanor or a felony. Even if you later make payment on the check there may be criminal charges or substantial fees and/or fines.
A NSF “payable on demand” check is not dischargeable in bankruptcy and bankruptcy will not exonerate you of a criminal act. The bankruptcy automatic stay does not apply to stop criminal prosecutions. Likewise, any debt to the victim of the bad check is now considered criminal restitution, also not dischargeable in bankruptcy. Any restitution, costs, and fines are not discharged by the bankruptcy.
While criminal prosecution of a bad check case is not affected by your bankruptcy, private collection is stopped by your bankruptcy. Any civil legal action concerning a bad check must stop, and any civil garnishment or other collection action must cease.
The second type of bad check is the post-dated check. These checks include payday loans and other checks that are essentially promises to pay in the future. You and the receiver are aware that the check is not presently negotiable. The bank will not pay the check because you don’t presently have the money in your account.
With a few narrow exceptions, being unable to pay a post-dated check is not a criminal act. However, it may be a crime to write a post-dated check that you intend to include in your bankruptcy. Typically the recipient of the post-dated check would have to file an adversary case with the bankruptcy court and prove that you committed fraud in writing the check with no intention to ever pay it.
If you have outstanding bad checks and are considering bankruptcy, discuss your situation with an experienced bankruptcy attorney. Your attorney can advise you on the best way to deal with a bad check during your bankruptcy.
Discharging Bank Account Debt During Bankruptcy
A bank account debt can offer many challenges to an individual in bankruptcy. Usually a bank account debt originates from fees associated with an overdrawn account. These fees can quickly accumulate and result in a debt of hundreds of dollars. A bankruptcy will generally discharge this debt, assuming the debt was not incurred by fraud or criminal activity. However, the issue is often should you discharge your bank account debt rather than can it be discharged.
In deciding whether to discharge a bank account debt, you must determine if repayment is feasible. In cases where the debt is small, the account is still open, and you have the resources to pay the debt, repaying the debt is generally the best option. Remember to consult with your attorney before repaying any debt prior to filing bankruptcy. In many cases it is advantageous to wait until after the case is filed before repaying a debt.
If paying the bank account debt is not feasible, you may face several negative consequences. First, the bank will close your bank account. Second, over eighty percent of all banks use Chexsystems, a consumer reporting agency that provides information regarding accounts at banking institutions. Negative information may remain on your Chexsystems file for five years. To view your Chexsystems report for free, visit: https://www.consumerdebit.com/consumerinfo/us/en/chexsystems/report/index.htm
While a bankruptcy will discharge a bank account debt, factual information concerning the debt will remain on your Chexsystems report after the bankruptcy. This information is available to financial institutions and may prevent you from opening another bank account.
Fortunately, there are programs available to an individual with a derogatory Chexsystems report offered by banks, universities, and not for profit groups. One of the most popular is the “Get Checking” program offered by several groups around the country. The University of Missouri Extension offers a typical “Get Checking” program, which requires a debtor to pay all outstanding bank fees on the prior bank account and take a six-hour checking education class. The debtor then receives a certificate of completion which can be used to open a new account at a participating financial institution. If ChexSystems reports suspicion of fraud on a prior account, a certificate will not be issued and institutions are not required to open an account.
If you have an overdrawn bank account and are considering bankruptcy, discuss your financial situation with an experienced bankruptcy attorney. There are many options to deal with bank account debt, but the situation can only grow worse from procrastination. Quick action is the best cure for this type of debt.
BBB Warns of Debt Relief Fraud
The Better Business Bureau recently issued a warning to consumers regarding the misleading practices of debt settlement companies. This warning comes after receiving more than 3,500 complaints since the start of the recession in 2007. The BBB reports that many individuals paid hundreds of dollars in upfront fees to debt settlement companies, but only fell deeper into debt after the process failed.
In an article posted to the BBB website, Stephen A. Cox, President and CEO of the Council of Better Business Bureaus said, “The debt settlement industry is flourishing and many families are being lured into believing that debt settlement is an easy fix and that their credit card debt will just disappear.” Mr. Cox went on to say that “the truth is that the process doesn’t work for many consumers, it has potentially serious negative consequences, and should primarily be used as a last ditch effort[.]”
Debt settlement companies typically offer to negotiate a settlement for a fee. Unscrupulous companies mislead consumers with promises of large savings and quick resolution. The truth is that it is difficult for a non-attorney to obtain a debt reduction of 50% or more. Additionally, these types of settlements are only available with a one-time payment. Most debt settlement companies require an up-front fee and ask the consumer to make payments into a savings account held by the debt settlement company for future settlement. During the process of six months to a year that it takes to build up the account, the consumer is at risk of garnishments and lawsuits.
In some cases fraudulent debt settlement companies have stolen from the consumer accounts, or refused to return funds. In other cases the consumer is driven deeper into debt when the debt settlement company is unable to settle the debt.
Unlike debt settlement, the bankruptcy process is a legal process supervised by a federal judge and the U.S. Department of Justice. Your agent is a licensed attorney throughout the process. There are no hidden fees and you pay only what you are able to afford. At the end of the bankruptcy process your debts are discharged and you receive a financial fresh start ordered by the bankruptcy court.
If you are struggling with debt and need financial relief, speak with an experienced attorney and discover how the federal bankruptcy laws can help you and your family. Don’t be a victim of a debt relief scam.
Discharging Credit Card Balances
As a general rule, credit card debt is among the easiest type of debt to discharge during a Chapter 7 or Chapter 13 Bankruptcy. However, in some cases credit card companies will dispute the discharge of credit card debt by filing an adversarial proceeding against the debtor in the bankruptcy court. The creditor may claim that all or a portion of the debt is non-dischargeable. Debts that are declared non-dischargeable may have to be paid during the bankruptcy, or may survive the bankruptcy altogether.
A credit card company may claim that the debtor committed fraud in obtaining or using the credit card. If the creditor can prove that the card was obtained under false pretenses (i.e. that the application was false), the credit card debt may be declared non-dischargeable because of the fraud.
A credit card company may also claim that charges were placed on the credit card when the debtor had no intention to repay the debt. Additionally, a presumption of fraud arises where luxury goods and services are purchased or cash advances are taken shortly before the filing of a bankruptcy case.
Credit card companies are entitled to notice of a debtor’s bankruptcy case, and these companies monitor bankruptcy cases for signs of fraud. Certain actions send up a red flag including:
- Filing bankruptcy on a new card;
- Taking a cash advance prior to filing;
- Charges for travel or vacation;
- A debt transfer from one card to another;
- Credit charges while unemployed; and
- Charges made after consulting a bankruptcy attorney.
The more time between the credit card activity and the bankruptcy filing, the less likely the charge will cause a discharge dispute. The best advice is: if you are considering bankruptcy, stop using your credit cards. Consult with your bankruptcy attorney regarding the best way to discharge your credit card debt.
My Credit Card Company Is Offering A Credit Monitoring Service: Is This Service Worth It?
Several companies have sprung up that promise to help protect you against identity theft. How do they do this? By monitoring your credit. An alert is sent to you when changes to your credit occur such as when a new account is opened or a new address associated with you is logged with a credit reporting company. Some credit monitoring services are independent companies and some are operated by credit reporting agencies such as Trans Union and Experian.
While there are advantages to using these services, there are some problems with them such as:
1) If you receive a Notification from a monitoring company, your information may have already been used illegally by someone who has opened up a new credit account with your stolen identity.
2) The monitoring services cannot catch certain forms of identity theft that don’t access your credit report such as a person using a stolen identity to a) obtain a Payday advance loan, b) apply for a job; or c) apply for a driver’s license.
3) Most of what these services offer, you can do yourself. You can file fraud reports and place fraud alerts and credit freezes on your credit files with credit reporting companies.
Many people believe that credit monitoring activities will make them completely secure against identity theft. That simply isn’t true. However, credit monitoring can be an important piece of your protection package. Some other things you can do include:
- Leave important documents in a safe place at home.
- Only carry the credit cards or other cards you plan on using that day (do not carry your Social Security Card).
- Properly destroy old credit cards, checks and unneeded receipts
- Shop only on secure Web site with companies you trust.
- Check your bank and credit card statements monthly for any suspicious activity.
- Personally check your credit report at least once a year.
Since the cost of a monitoring service usually runs $10 to $15 a month, it may be worth it for the peace of mind in knowing that you are purchasing a little added insurance to avoid being the next victim of identity theft.