Bounced Cheque! How Creditors Recover and How Much Risk the Issuer Faces

It means the bank has refused payment, most often because there were insufficient funds or the account had been closed. Once that happens it becomes a dispute in which both the creditor and the debtor should understand their rights and their risks.

It can be both. A cheque is clear evidence of a debt, so the creditor can sue for the cheque amount in a civil case, and in some cases issuing a cheque knowing there were insufficient funds can carry criminal liability. That is what sets bounced cheques apart from ordinary debts.

Keep the original cheque and the bank's return slip — those are the key documents. Then record the source of the debt, meaning what sale or loan it came from and when, before issuing a demand letter and consulting a lawyer about suing and the limitation period.

Do not ignore it. Negotiate payment or instalments promptly, because beyond civil liability there may be criminal risk. Having a lawyer negotiate and verify the debt amount before you agree to anything helps limit the damage.

Because the cheque itself is documentary evidence of the debt, which puts the creditor in a stronger position than with a verbal arrangement, and because issuing one knowing the funds were not there can lead to criminal liability rather than only a civil claim for the money.