The Myths and Reality of Post Dated Checks
By Michael C. Dennis, MBA, CBF

One of the myths that somehow refuses to go away is the myth that post-dated checks are "illegal." They are not. There is nothing illegal, inappropriate, unlawful, unethical, unprofessional, or unconscionable about a creditor asking a customer to issue a post dated check, nor is there any reason a customer cannot issue one or a series of post dated checks to clear a past due balance.

There are several advantages to taking postdated checks in settlement of an account balance including these:

1. The fact that you are holding a check that will be presented to the bank for payment on a specific date places a burden on the debtor to have funds on deposit when the check is presented.

2. In the event that the check is dishonored and the customer is sued, the existence of the check makes it harder for the customer to argue that the debt was never owed.

3. Even if a post dated check is not honored when it is first presented, there is always the possibility that the check will clear at its second presentment, or that the creditor can tender the check to the debtor's bank on a collection basis.

There is a down side to accepting post dated checks...If a creditor accepts a post-dated check in exchange for merchandise or services, in many jurisdictions the seller is considered to have extended credit to the issuer of that check. As a result, the transaction is not considered as issuance of a "bad check" since the creditor released the merchandise or performed the service in reliance of the check writer's promise to pay at some later date rather than in reliance of the check's negotiability. Therefore, the protections offered to creditors under the various "bad check" laws may not apply.