As most collections lawyers understand, many small business owners are frustrated by customers who write bad checks to the business for goods or services. If you are a small business owner who is wanting to learn about how to collect the money owed to you by people who wrote checks that were returned for insufficient funds, the New Jersey collection lawyers at Snellings Law LLC can explain how you can go about doing so.
Handling Bad Checks Written by Individual Customers
When a customer has written your business a bad check, there are several steps you can take in order to collect what is owed to you.
1. Call the Customer
When you accept checks for payment, it is a good idea to always make certain you have written down the customer’s correct phone number on the check. When you call the customer, it is important that you are mindful to do so in a way that is not harassing. Make sure you do not call before 8 am or after 9 pm, and only discuss the matter with the customer and not anyone else who might answer the phone. If you are able to speak to the check writer, ask them to make good on the check in a polite but firm way.
2. Send a Written Demand to the Customer via Certified Mail
Under New Jersey Statute 2A:32A-1, you can send a demand letter by certified mail to the person who wrote the check to your business. If they do not respond with payment of the face value of the check with cash, a money order or a cashier’s check within 35 days of their receiving the letter, then you have the right to sue them. In addition to paying you the face value of the check, the person will be responsible for paying the court costs, the cost you spent mailing the certified demand letter and the legal fees of your New Jersey collection lawyers. They may also be ordered to pay damages in the amount of three times the face value of the check or $100, whichever is the higher amount. The court will not order damages that exceed $500, however.
3. Call the Bank and Inquire
After a few days have passed, you can try calling the bank upon which the check is drawn. Tell them the person’s name, account number and the amount of the check. Tell them the amount of the check and ask if there are enough funds in the account to cover it. Sometimes, a person will have made a deposit after your check was returned, and if you find out there is enough to cover it, you can go to the bank and cash the check or send it through electronically. You can also ask the bank if they offer enforced collection. While not all banks do this, some will set your check aside and pay it first when the person deposits money in their account. Make sure you ask about the fees the bank requires if they offer this service.
4. Ask That the Person Be Prosecuted
Under New Jersey Statute 2C:21-5, a person who intentionally or knowingly writes a bad check may be criminally prosecuted if they have failed to make good on it after receiving notice. In your notice, never threaten criminal prosecution. Simply send the demand for payment as outlined above, and if they don’t respond, you can make a police report and ask that the person is charged criminally.
5. File a Small Claims Court Lawsuit
In most cases, your option for a lawsuit will be small claims court. In New Jersey, cases involving amounts of recovery of $3,000 or less are filed in small claims court. If you prevail, you’ll be entitled to receive the face value of the check, the court costs, your litigation costs and damages as previously outlined. Obtaining a court judgment will also give you the ability to seek a garnishment of the person’s wages to pay the judgment owed to you.
6. Use a Collections Agency
While a collections agency will take a percentage of what they recover, using their services may be a good idea if the check is small or if you don’t want to bother with the hassle and time involved with going through small claims court.
What to Do If Your Customer Placed a Stop Payment Order on the Check
In some cases, a customer will stop payment if they are unhappy with the goods they purchased, claiming they were defective. If that is the case, they may assert that as a defense to your bad check claim. If they are able to prove that the goods were in fact defective, the amount they owe may be reduced or even completely negated in court. Depending on the circumstances, it may be a good idea to just tell the customer to return what they purchased to you instead of proceeding through court. Otherwise, you can use the remedies that have been previously outlined.
Avoid Payment in Full Checks
Sometimes, a customer will try to pay for an amount that is in disputed with a check on which they’ve written “payment in full.” If they owe you more than the amount written, cashing or depositing that check is considered your agreeing that the amount satisfies the balance. This means you will be precluded from seeking the remainder owed to you. Getting help from a collection attorney may be a good way to recover what is owed to you without needing to go through court. A lawyer may know what to include in the demand letter and may be able to write the demand in such a way that the person makes good on the payment. If you have to file your case and go through small claims court, your lawyer can seek the garnishment for you to place against the person’s wages. In this way, you may have better success in collecting from the person who wrote the insufficient funds check to your business.
Contact Our Collections Lawyers
To speak to the collections lawyers at Snellings Law LLC about collecting bad checks, call (973) 265-6100.