Bounced Checks

A check is a widely used and important commercial instrument. One important issue regarding payment of a check is that sometimes a check goes unpaid — in effect, it was issued without sufficient funds (bila-mahal). This type of check, which is returned by the bank, is referred to as a "bounced check," and knowing how to collect on a bounced check is an important and commonly encountered issue. Under the Check Issuance Act, a person who issues a check must, on the date written on the check, have cash in their bank account equal to the amount written on the check. Otherwise, the check can be returned, and the necessary legal action can be taken against the issuer.

What is a bounced check?

The law provides for certain cases of a bounced or unfunded check, in which, if any of the following circumstances exist, the check can be treated as bounced or unfunded, and the necessary legal action can be taken to collect the amount of the check:

• The issuer does not have sufficient cash in their bank account, or the account holder withdraws all or part of the funds backing the check they issued.
• The issuer, knowing their account is closed, issues the check, or closes their account after issuing the check.
• The issuer instructs that the funds not be paid to the holder of the check.
• The check has been drafted in such a way that the bank refuses to pay the holder for reasons such as an alteration, a mismatched signature, or a discrepancy in the check's contents.