08 Aug Can I Wipe Out Bad Checks and Get Out Of Chex Systems?
Bankruptcy can help with bounced checks but it doesn’t solve all the problems. You can discharge bad check civil liability but not potential criminal liability. And it probably can’t get you “out” of Chex Systems.
A check is a promise to pay. If it bounces, you owe the other person a debt. That debt can be wiped out in bankruptcy so long as the court doesn’t conclude you intentionally defrauded the other party. This is the civil liability side of things.
In many states, passing a bad check is also a crime. You cannot wipe out a “debt to society” (a crime) with bankruptcy. Indeed, the automatic stay will not normally even slow down a prosecutor. It is common for prosecutors to use the threat of prosecution to collect bad checks for local merchants. Some courts have held that prosecutors can be stopped from collecting debt with bankruptcy. But other courts completely disagree and will not intercede to stop prosecutors. It is critical that you consult with an attorney in your area about these issues and not assume that filing bankruptcy is the end of the problem with bad checks.
Another common problem resulting from bad checks is a negative report to Chex Systems, Inc. Chex is a credit reporting service, like TransUnion and Equifax. It takes reports from banks showing how good or bad you have been in managing bank accounts. A negative Chex Systems report can make it nearly impossible to have a bank account. The negative information can stay on your report for 7 years. This can be true even if you made good on the bad check.
We often hear folks say you can’t get a bank account after bankruptcy. This is almost never true, although banks may evaluate your credit in deciding to open an account. Typically what has happened is that someone wiped out bad checks or overdraft accounts in bankruptcy which, in turn, resulted in a Chex report.
You can and should get copies of your Chex reports periodically, just as you would from other credit bureaus. If you are denied an account based on a Chex report, you can order that report here. You should file written disputes of any information you think is incorrect in the reports. It is convenient but not helpful to dispute entries over the phone or by e-mail, you will not preserve your rights under the Fair Credit Reporting Act. Instead do it in writing, keep copies of the letters, and send them by certified mail, return receipt requested. Review the FTC publication for additional information about disputes.
If a false report is causing you serious problems, it is extremely important to work with a consumer attorney familiar with FCRA issues early. Your bankruptcy attorney may be one such person. Or you could contact the National Association of Consumer Advocates.
If you really were naughty and had bad checks out there, don’t give up hope of getting back into the banking system. Many banks are beginning to realize that a Chex report is not proof you are forever and always a bad risk. So it is worth shopping around. Banks that help people get back into the banking world know you’ll be pretty loyal. Just don’t do your borrowing from them without being aware of the setoff risks.
Another option is to go through special education programs designed to offer you a “fresh start” in banking. The University of Missouri, for example, offers a little-known program called “Get Checking.” Several banks, including many credit unions and some larger banks, offer checking privileges to customers who would not otherwise qualify if they have completed the UM program. It could be well worth your time to check your local state and community colleges to see if such programs are available in your area.
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