Here, the U.S. Bankruptcy Court held that a debtor’s issuance of some $8,784.00 of worthless non-sufficient fund (NSF) checks would be  nondischargeable in bankruptcy.

In this progressive case for creditors, the court found that debtor’s tender of five nonsufficient fund checks (NSF) constituted fraud by the debtor. The debtor tendered said checks to Supercom in exchange for debtor’s receipt of computer equipment.

For a creditor to prevail on a claim that a debt is nondischargeable on the grounds of false pretenses, false representation, or actual fraud, it must prove: that debtor obtained property through representations which debtor either knew to be false or were made with such reckless disregard for truth as to constitute willful misrepresentation; that the debtor possessed intent to deceive; and that creditor actually relied upon the false representation and that its reliance was reasonable.

In this case, the court found that the debtor issued checks to Supercom (and others) without any particular attention to his checking account balance.

The debtor’s issuance of the checks amounted to a representation that he had sufficient funds in his account to cover said checks.

Although debtor claimed he did not know his checking account was overdrawn, the loose manner in which he maintained his account inferred a reckless disregard in issuing the NSF checks. In addition, Supercom testified that it relied upon the debtor’s checks as being negotiable.

The court held that the $8,784.00 of worthless checks would be nondischargeable; the court also awarded prejudgment and postjudgment interest to the creditor on the NSF checks. Supercom, Inc. vs. Alexander Levitsky, 137 B.R. 288.

EDITOR’S COMMENT

The case above is an excellent ruling in favor of creditors to whom worthless checks have been issued. Credit unions often face a loss when debtors have written NSF checks that are paid out by the credit union, only to have the debtor file on those checks in bankruptcy.

Creditors are encouraged to utilize the above case in order to compel payment from the debtor for issuing worthless checks.

Charles R. Harroun, Attorney at Law