Client Check Bounces

[Neanderpaul]

What do you do when your endorsement check bounces from a client who advertises with your station? Oh, and that client files Chapt. 11 after cutting that check?

We have a client well in arrears, and their most recent payment, which originally posted, has now been returned. Which has set in motion a chain of events that will cause payments to be returned to my bank and potentially ding my credit.

Anyone have this happen? How did you approach it?

 

[DarkStarPDX]

The only thing you can do is have your lawyer submit a claim for payment to the bankruptcy court.

If you try arguing that their check being returned caused you to bounce checks they won't have any sympathy. They will state that it's your responsibility to verify the funds have cleared prior to using them. It sucks, but it's the law...

 

[Savage]

In some states there is a legal presumption of fraudulent intent with bounced checks, especially in the context of business (as opposed to consumer) transactions.

For example, in New York State, you can go to the client's bank with the returned item and file a "protest." It's tantamount to serving notice that you are going to file a criminal complaint. Once you have the protest form from the deadbeat's bank certifying that there are insufficient funds, you can have the police pick up the signator on a charge of "tendering a fraudulent business instrument." It's serious. They can go pick the guy up and haul him down to the station for fingerprinting.

In addition, under New York commercial law, tendering a rubber check entitles the payee to TREBLE (triple) damages. I'm not sure how or whether a bounced check claim survives a bankruptcy. It may elevate you to the status of being a "secured creditor" as opposed to just another person who's owed money. Depending on how much money there is in the bankrupt person's estate this might eventually get you some dough or you might still be SOL as the bankruptcy judge decides who gets what, if anything.

Good luck! In our business - as in any business where you sell "intangibles" - insist on credit references before you extend terms. "An ounce of prevention...." After all: you can't repossess the spots if the client goes banko. Generally - if you get stiffed - the available remedies aren't very effective.