Texas Bad Check Laws: An Overview
Bad check laws in Texas generally prohibit the passing of checks with an insufficient fund or without sufficient credit. The Texas Penal Code makes it a Class B misdemeanor to knowingly or intentionally deliver or pass a check drawn on insufficient funds or that is not otherwise authorized by the account holder. This prohibition extends to any negotiable instrument drawn on a credit account or other debit or credit account. A "check" is defined by Texas law as a draft or a written order to pay a fixed amount of money. This term includes "any substitute for a check," which would include drafts, money orders, promissory notes, or letters of credit.
If you are arrested for writing a bad check in Texas, you will be prosecuted for the crime in the county where the check was written. A "bad" check may be returned to the maker by the bank on which it is drawn, through the payee attempting to cash or deposit the check, or by the payee seeking a warrant for the individual whose check has "bounced." If the District Attorney or a private attorney represents the entity that received a bad check, they may file a civil suit against the individual that passed the "bad" check. A dishonored check may be the basis of a "bad check suit" in small claims and justice (civil) courts as well . Bad check suits can be filed to collect against an individual if the "bad" check was passed for an amount that does not exceed the "small claims jurisdiction," which is currently $20,000, exclusive of interest, costs, and attorney’s fees.
A criminal lawsuit may also be filed against an individual based on the amount of the "bad" check, even if there is no outstanding balance owed. This is the standard method used to prosecute those criminally charged with writing "bad" checks and is handled by the District Attorney or the County Attorney. In Texas, a Class B misdemeanor charge is punishable by up to 180 days in jail, a fine of up to $2,000, or both. More than one "bad" check may be the basis of a single Class B misdemeanor charge, but in no event may a defendant be charged with writing a total of more than 25 bad checks, irrespective of the amount for which each check was written. The amount of the check(s) becomes important for a prosecutor in determining whether the case should be filed as a "Class A misdemeanor," "state jail felony," or "felony of the third degree." The minimum amount of the check necessary to result in a felony offense is $2,500.01. The maximum amount for a third degree felony in Texas is $200,000.00.
What Constitutes a Bad Check in Texas: Legal Definition
The term "bad check" is not expressly defined under Texas law. However, Texas penal law cites various offenses involving "checks or similar sight orders" which it describes as "promises to pay." Under Texas Penal Code § 32.41, "promissory" refers to "an instrument or order for the payment of money, issued as part of a checking account and drawn on a financial institution." Therefore, knowing the legal definition of a bad check as a promissory instrument is critical to determining whether a bad check charge against you is an appropriate offense or not. The legislative annotation of the pertinent statute advises as follows:
Promissory Instruments Raised from the Debtor’s Security
"Promissory" means an instrument or order of the payment of money, issued as part of a checking account and drawn on a financial institution. This instrument or order should be made by an organization which is as defined by Sec. 31.01(a)(4)-(8). Therefore a promissory note is not a check issued as part of a checking account.
To classify as a "check", the instrument must otherwise comply with provisions of UCC 3.102. This code section provides that a check is: (1) an instrument (2) containing an unconditional promise to pay (3) a sum certain in money (4) on demand or at a definite time (5) to order or transfer of bearer. A negotiable check then must be "signed" by the person giving the check and must be payable to order or a bearer. UCC 3.104.
Failure to meet the above statutory definition of the term "check" suggests a potential defense based on the premise that the instrument did not comply with the black letter law common law definition of a check.
Penalties for Bad Checks in Texas
The main penalty for writing a bad check in Texas is criminal prosecution. In other words, if the prosecutor decides to file an information or indict the check writer for issuing a bad check or check fraud, the check writer will likely be charged with a criminal offense. Therefore, a person who issues a bad check could face a Class C misdemeanor citation or could be indicted for a Class A misdemeanor, or indicted for a state jail felony. For example, if an accused check writer is a repeat offender, having issued two or more bad checks, that person may be indicted for a state jail felony, potentially facing 180 days to two years’ confinement in a state jail and a fine of up to $10,000.00. However, even if the prosecutor decides not to file an information or an indictment, there can still be civil consequences for issuing a bad check, such as being sued by the person who was issued the bounced check. These civil claims may potentially be brought in small claims court, county court, district court, and in some cases municipal court. Depending on the total amount of all of the bad checks issued by the check writer, the issuer could be looking at hundreds or thousands of dollars in damages and penalties. This does not include any attorney’s fees that may be incurred by the bounced check recipient in any resulting civil litigation.
Consequences of Giving a Bad Check: Civil and Criminal Charges
Liability for a dishonored check is usually civil in nature. However, there are some instances where the bounced check will be considered a criminal act. The distinction is primarily in the degree of returning or failing to return the property purchased by the check.
If a person writes a check and then tries to stop payment on the check before it gets to the bank, he has committed a crime. If a person writes a check and fails to have sufficient funds to cover the check and never intends to pay for the check, he may have committed a crime. Failing to pay is the distinguishing factor between civil and criminal liability. A person who issues a bad check cannot be arrested or charged with a crime unless he failed to pay for the goods with the intent to defraud or hurt the retailer. Moreover, a person who just fails to pay for the value of the check without the intent to defraud can commit other crimes such as theft. The criminal laws for bad checks and theft are intertwined. Pursuant to Section 31.03(a) of the Texas Penal Code, a person commits an offense if he unlawfully appropriates property with the intent to deprive the owner of the property. Property under the Penal Code includes money, goods, services or any other tangible or intangible good that can be appropriated. Section 31.04(a) defines appropriation as "to acquire or otherwise exercise control over property" (1) without the owner’s effective consent, (2) by deception, (3) by coercion. Under this section, the issuance of a bad check may be done by deception. A person can commit theft by deception if he or she issues a check on a closed account, or an account that did not exist at the time the check was issued.
What to Do When You Are Given a Bad Check
When you or your business receive a bad check, you have options. For negotiations or potential legal action, it may be best to consult with an experienced attorney about the circumstances of the check and your relationship with the check writer. An attorney may offer guidance on:
When you receive a bounced check, you should make sure that you determine why it did not go through. After contacting the bank that the check was drawn on, you will likely be able to confirm why it bounced and whether or not it was deposited into the correct account.
If you were timely in sending the ‘Notice’ letter, you will likely have followed the proper procedure in Texas Civil Practice & Remedies Code § 43.001 to pursue an additional legal course of action. Once you have sent the notice to the check writer, you have the option of either filing a civil lawsuit or turning the matter over to law enforcement. In Texas, it is not unusual for an offense to pursue both civil and criminal remedies. When the check writer issues a check to you that has no funds, he or she has committed two offenses: Civil Theft and Writing Hot Checks – each of which constitute a crime and a tort. In Criminal Theft , the check writer may face jail time as well as restitution. In Criminal Hot Check, the check writer may face incarceration, in addition to money damages. In the civil realm, the penalties for civil theft can be staggering – in addition to the face value of the check, you mileage may be $1,200; damages resulting from the theft of property are treble damages as well ($1,200 x 3 = $3,600); and attorney fees are reasonable and necessary. If you prefer to avoid the criminal justice system, you may choose to proceed only civilly against the check writer. As mentioned above, because the act of writing a hot check constitutes two offenses and a tort, you can pursue both a claim of theft as well as a cause of action for Bounced checks (Texas Penal Code § 31.03). However, for a cause of action for Criminal Hot Checks to be established, there must be proof that at the time of issuing the check, the check writer knew that there were insufficient funds in the account he or she drew from. Essentially, the state of mind required for the offense is known as ‘intentional.’ In contrast, the state of mind required for establishing the civil tort is negligence. Thus, you may wish to pursue Criminal Hot Checks. Civil Theft may provide you with larger remedies.
Defenses to a Charge of Passing a Bad Check
If you are accused of writing a bad check, there are a number of common defenses to those charges which might apply to your situation. These defenses can be used to help you avoid a conviction and possibly to even have a case against you dismissed before it even gets to court.
The "Insufficient Funds" Argument
A common argument in these cases is that there was not technically no money in the bank account to cover the full amount of the check at the time it was written. This is usually due to some sort of other expense that was unexpected, and this can be shown through bank statements confirming that, while there was not enough money to cover the amount of the check, there was still some available cash to be drawn from when the check was written.
Good Faith Belief
Another common argument used is the good faith argument. This asserts that the drawn-against parties believed they had enough money to cover the amount of the check and that the check would go through whenever the money did become available. While this is not a complete defense to a charge of writing a bad check, it can help your case significantly. This is particularly the case if you have otherwise maintained a clean record, paid all your bills on time and generally have a good reputation in the community. If that is the case, your previous conduct can help you to establish you did not write the bad check maliciously and specifically did not write the check knowing there was not enough money to cover it.
Administrative Error
There are a number of ways a banking institution or business could make an unforgivable error that prevents the money from being available to cover the check at the time it is presented for payment. These include the following:
Depending on the circumstances involved in your case, one of these defenses may go a long way toward helping you get your case dismissed or achieving a favorable outcome to your situation.
How You Can Avoid Bad Checks
Businesses and individuals can take several proactive legal measures to steer clear of situations where they might receive or write a worthless check. To avoid the negative criminal and civil consequences of bad checks, everyone should consider the following steps: Establishing trustworthy verification methods for checks is one of the best ways to avoid bad check problems. Although it is not always possible to identify problematic checks, there are certain oddities that almost always indicate a problem. Below are some examples: When possible, businesses and individuals should request information from check writers before accepting payment. For example , the name on the check should match the ID being shown. Many people will write checks from home, so things like an order form or invoice should have the same name as the check. There are also a number of practical money-handling safeguards that can be put in place. When checks are being collected, they should be deposited without delay. However, even if they are taken to the bank, the check holder needs to ensure that the bank actually processes the check correctly. In bad check cases, it is critical that courts see that recipients have behaved reasonably. If there is any evidence that a recipient of a check has not taken steps to ensure that the check was properly verified or that it was deposited, the court could look unfavorably upon them.