It is illegal to knowingly write a worthless check in North Carolina. The exact law can be found on the North Carolina General Assembly webpage under "General Statues," Chapter 14, Section 107.
What happens when an account holder writes a bad check in North Carolina?
When an account holder writes a bad check in North Carolina, the company or individual, who received the check, attempts to cash it through their banking institution. The company's bank accepts the check, credits the company's account and submits the check to the originating bank. The originating bank checks the account and debits the money from the account. If the account does not have enough funds to cover the check and the account does not have overdraft protection, the bank refuses to cash the check. The refused check is sent back to the company's bank as unpaid and the company is notified.
What is considered a bad check?
A bad check is a check that is written for more than the available balance in the checking account or on a checking account that has been closed. This assumes that the individual with the account knew that the check was bad prior to writing and submitting the check as payment.
The individual did not knowingly write a bad check if there were more funds in the account than the amount of the check prior to writing it, or a payroll check or other deposit bounced or was not input into the account in a timely manner by the bank.
What are the legal ramifications for writing and submitting a bad check?
The penalties for writing a bad check depend on the type of protection on the account. If the account has overdraft protection or overdraft coverage via another account, the bank will pay the check and charge the account holder specific fees according to their terms of service.
Joe wrote a bad check in the amount of $50. He knew at the time he wrote the check that the account only had an available balance of $40. However, Joe has overdraft protection. Since he has overdraft protection, his bank will pay the full amount of the check and charge Joe an overdraft fee. Because the bank cashed the check, Joe's account is overdrawn, and he must make restitution with his bank according to his bank's terms of service, but since he has overdraft protection, he is not subject to any legal ramifications.
As of 2009, bank customers are protected under the "Consumer Overdraft Fair Practices Act." Prior to the Act, every checking account came with overdraft protection and fees were assessed per overdraft. Since the implementation of the Act, checking account holders are required to opt into overdraft protection services.
If the account holder does not have any overdraft protection or coverage on his or her account, he or she could be liable under North Carolina's criminal law and ordered to pay fines and/or spend time in jail.
Worthless Checks Greater Than $2,000
If an individual or business writes a bad check in excess of $2,000, it is considered a Class I felony. A Class I felony is the least serious of all the felony classifications in North Carolina. There is no set sentence. The sentence and fines are completely up to the judge handling the case.
Worthless Checks $2,000 Or Less
If an individual writes a worthless for $2,000 or less, and it's a first offense, the individual can be charged with a Class 2 misdemeanor. A Class 2 misdemeanor can result in a maximum sentence of 60 days in jail. This does not include any monetary fines.
If the individual has been convicted of writing bad checks in the past, he or she can expect to be charged with a Class 1 misdemeanor. A Class 1 misdemeanor can result in spending a maximum of 120 days in jail. This sentence can also include probation, being ordered to not write anymore checks and being banned from owning a checking account for up to three years.
Along with mandatory jail time, the judge may also order the individual to pay the amount of the check in full, service charges including overdrafts or bank fees that the receiver of the check incurred, processing fees and witness fees.
In all the above scenarios, it is up to the judge to determine the exact punishment for writing the bad checks.
For further information on writing or passing a bad check and for civil and criminal penalties in other states under the laws of issuing bad checks, please read Bad Check Laws
Find out how to Prevent Overdraft And Bounced Check Fees.
Learn about Fraudulent Checks And Withdrawals.