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Payback for Bad Checks: 3 Tips to Get Even

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By Andrew Chow, Esq. on March 20, 2012 6:57 AM

Bad checks can be a huge hassle for small businesses, and not just because of lost revenue. Getting even with the customer who wronged you can cost precious time and money -- and perhaps even affect your other customer relationships.

Bad checks generally fall into one of several categories: Insufficient funds, a closed account, stopped payment, or forgery. Your options to pursue payback may include a civil lawsuit, or even a criminal complaint.

Whichever path you choose to pursue, here are three tips to help kick-start your bad-check restitution case:

1. Follow an established policy for check acceptance.

Experts recommend jotting down the customer's driver license number and phone number on the check. This gives investigators an additional way to track down the check writer, in case the check turns out to be a fraud.

Other good policies to follow include:

  • Only accept checks with a complete address on the front -- no P.O. Boxes.
  • Only accept checks signed in your presence.
  • Don't accept out-of-state checks.

2. Notify the customer in writing.

Many states require a business owner to provide written notice to a customer who passed a bad check due to insufficient funds; written notice may also be required for other types of bad checks as well. This gives a customer time to correct an honest mistake.

Check with your state's laws, or contact an attorney, to see what's required in a written notice where you live.

3. Contact local prosecutors or an attorney.

If a customer fails to respond to a written notice -- usually within 10 to 30 days -- that generally opens the door to civil lawsuits, and perhaps criminal charges like theft or fraud.

Some local jurisdictions have "bad check restitution programs" specifically to help small businesses collect on bad checks. Check with your local prosecutor's office, or consult a collections lawyer about which options apply in your bad-check restitution case.

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