Bad Checks and How to Collect on Them

In 2000, the number of bad checks written annually was estimated at 750 million. A mid-90's Nilson Report projected the annual number of bad checks to continue to rise by 2 to 4% every year through 2020.

These statistics indicate both individuals and businesses have to know how to go about recovering on bad checks, either by themselves or by working with a national collection agency.

While there are many options available, most find utilizing a national collection agency to take care of recovering on bad checks the most time and cost-effective way.

Option #1 - Contacting the Debtor to Demand Payment in

Writing a letter or calling the debtor's home, work and cell numbers all sounds simple enough, but for those not familiar with Fair debt collection Practices, what seemed like a reasonable approach for recovering on bad checks can quickly get the creditor into trouble.

Professional national collection agencies keep up to date with any changes to Fair Debt Collection Practices Act and avoid any counter-suing possibilities by pursuing collection of the debt in legal ways.

Option #2 - Continuing to Check with Bank

Contacting the bank every day and rushing down to cash the check once there are sufficient funds is an option - but this turns recovering on bad checks into a full time job and most people have neither the time nor the personnel to dedicate the hours needed for this option.

Once the bad check is turned over to a national collection agency, it is recognized as a debt, and is now in 'collection' status, avoiding the possibility of the check not being honored by the bank after a period of time. (Six months is the average.)

Option #3 - Law Enforcement or Small Claims Court

Although criminal and civil laws vary from state to state, generally those who have received a bad check can contact their local law enforcement or district attorney's office - however, prosecution for writing a bad check often hinges on proving criminal intent.

Small claims court handles recovering on the bad check via the civil arena, voiding the need to prove criminal intent. The combination of court fees, summons service fees and the added cost and headache of collecting on the judgment, once it is awarded, often leaves those who chose the smalls claims court route incurring as much as $150 or more in extra expenses and still no recovery of the amount they were awarded by the courts.

A national collection agency takes care of the entire debt collection process, often with little or no upfront fees. They also have the ability to report to the Credit Bureaus and meet all the criteria needed to keep the 'debt' active until collected.

Option #4 - Work with a Collection Agency Before Getting a Bad Check

By working with a national collection agency before accepting the first check, both individuals and businesses can tailor their check acceptance policies to ensure a speedy, efficient process of recovering on bad checks when they do occur.