Non-Dischargeable Criminal Penalty vs. Post-Filing Debt Collection Attempt?
[caption id="attachment_2980" align="aligncenter" width="300"] Photo by Keith Allison courtesy of Wikimedia Commons[/caption] Although the American Bar Association has determined that it is unethical for county prosecutors' offices to allow creditors to use their letterhead for the purposes of collecting on bounced checks, it is common practice for county prosecutors to at least run some variety of "check enforcement" program. This is another name for "collections department," but the peculiar thing about these programs is that they are collections efforts run by government officials for the specific benefit of private entities. The Wayne County, Michigan Prosecutor's office runs just such a program, and it is not uncommon for people in the Detroit area who have written checks that have failed to clear to receive a letter from the Wayne County Prosecutor alleging that the merchant who received the bad check has referred the matter to their department and that criminal prosecution for check fraud is a possibility, unless payment is made.
What does this have to do with Chapter 7 or Chapter 13 bankruptcy?
Occasionally, letters of this sort are received after the filing of a Chapter 7 or Chapter 13 bankruptcy. The question then becomes one regarding the character of the debt at issue itself: while bankruptcy will easily discharge and eliminate consumer debts of every variety, it does not discharge a debt incurred through fraud or that is the result of a criminal fine or judgment of any sort. It is also the case that creditors who attempt to collect debts post-filing violate the Federal "automatic stay against collections" injunction that is initiated by the filing of the bankruptcy petition (or the permanent discharge injunction once the bankruptcy court awards a discharge). When a check is referred to a prosecutor's office for potential criminal charges, therefore, whether it is an attempt to unlawfully collect a debt post-bankruptcy-filing or it is simply non-dischargeable criminal restitution or penalty is a very fact-specific examination. First, it is important to remember that nothing that happens in the Bankruptcy Court will stop or slow a county prosecutor's process of determining whether a criminal charge ought to be filed. If the check is referred to a prosecutor prior to your filing a Chapter 7 or Chapter 13 bankruptcy, the bankruptcy process will not slow the prosecutor's review of the matter. If it is referred by the creditor who received the check from you after the bankruptcy is filed, it is possible that the action of referring the check to the prosecutor will be viewed by the bankruptcy judge presiding over your bankruptcy case to be an unlawful post-petition attempt to collect a pre-petition debt.
Bad Checks and Bankruptcy: How Does the Court Decide?
The bankruptcy court will look at a variety of factors to make this determination, if your bankruptcy lawyer files a motion for contempt or sanctions based upon the action:
- Whether the check was post-dated;
- The date on which the check was written and provided to the creditor;
- Whether the debtor met with a bankruptcy attorney before writing the check;
- The amount of money involved;
- Whether the bank account from which the check was drafted had sufficient funds on the date of the check's writing;
- Whether the debtor writing the check had reason to know of the account's insufficient funds;
- What the funds were used for;
- How financially savvy the writer of the check is;
... Among other things.
Bad Checks and Bankruptcy: The Bottom-Line
The bottom line is that, if you think you may need to file for bankruptcy, avoid taking unnecessary risks with paper checks. Do not write checks that you know cannot be covered by the funds in your account. Do not visit payday lenders, who commonly require you to provide 2-3 post-dated checks at the time you take out the loan. If your debts are the reason that you are feeling pressured to write or post-date checks for balances you know or aren't sure you can cover, just schedule an initial consultation with an experienced bankruptcy attorney to find out how you can alleviate your debt problems without going to potentially criminal extremes. If you are a Michigan resident and would like to explore your options for a Chapter 7 or Chapter 13 bankruptcy with an experienced Michigan bankruptcy attorney, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.
If you enjoyed reading "Bad Checks and Bankruptcy: Post-Filing Criminal Charges," please browse our other articles on our main Michigan Bankruptcy Blog.