A Debtor had entered into a loan transaction with Quick Lend, Inc. pursuant to which debtor received a cash advance and in return gave a post-dated personal check for $365.85.
This check was to be deposited by Quick Lend in approximately 60 days if the loan had not otherwise been satisfied by the debtor. Less than a month later debtor filed a Chapter 7 petition.
Quick Lend was notified of the bankruptcy filing by facsimile transmission but nevertheless contacted debtor demanding payment (possibly in violation of the automatic stay). When payment was not forthcoming. it deposited the check causing debtor’s bank account to be overdrawn and debtor assessed with overdraft charges.
The Debtor filed a motion in the bankruptcy court to hold Quick Lend in contempt for willfully violating the automatic stay. The motion was denied but the court nevertheless granted the debtor a judgment for the amount of the check, plus interest, as an …unauthorized post-petition transfer. In re Webb, 432 B.R. 234 (Bankr. N.D. Miss. 2010).
Judge Houston first noted that a personal check was a negotiable instrument and, as such, negotiation of the check did not constitute a violation of the automatic stay under one of the exceptions. § 362(b)(1l).
The court noted that Congress in BAPCPA did not make any amendments to the Bankruptcy Code to restrict post-petition presentment of debtor’s checks by payday loan lenders. However, a transfer occurred on the date that the check was honored, which was post-petition and not authorized by the court. Because the trustee had disclaimed any interest in this property due to its inconsequential monetary value.
The debtor was entitled under § 522(h) to directly seek avoidance of the transfer. Given the nominal amount involved, the court did not require the debtor to file an adversary complaint and issued a judgment for the amount of the check, plus interest. Are debtors post dated checks considered Pre-petition and subject to avoidance, the answer is likely. If you hold a post dated check and the debtor files for a bankruptcy, you should contact an attorney before cashing the check.
Post Dated Checks Considered Pre-Petition – for more information about Bankruptcy – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081. Evening and Weekend hours are available to meet with an attorney. If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.