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19 Bus. L. Rev. 65 (1986)
Problems with Bad Checks in Bankruptcy

handle is hein.journals/binslwriw19 and id is 69 raw text is: PROBLEMS WITH BAD CHECKS IN BANKRUPTCY by Madelyn M. Huffmire* Barkgr-und The automatic stay provisions contained in the United States Bankruptcy Code are designed to recognize the power of the states to enforce their own criminal laws. 11 U.S.C. 8 32(b)(1) provides that the filing of a petition in bankruptcy doss not operate as a stay of the caimencement or continuation of a criminal action or proceeding against the debtor. The recognition of the police power of the states to punish criminal conduct, iowever, can conflict with the intent of Congress to provide for the rehabilitation of debtors under the Bank- ruptcy Cede and the granting of bread powers to the bankruptcy court to achieve this goal. This conflict is clearly illustrated by the initiation of criminal proceedings in state courts against debtors for issuing bad checks by creditors seeking to collect debts listed in the debtors' petitions in bankruptcy. The subsequent requests by debtors asking the bankruptcy courts to enjoin the state Court criminal. proceedings have received inconsistent treatment, resulting in a diverse tody of case law. This lack of uniformity in the cases should be resolved, if necessary, by amending the bankruptcy code. This article explores the present state of the law of bad checks in bankruptcy and recomrends that the current case law requiring proof of criminal intent be incorporated into 8363(b)(1) and rejects the argument that all creditors he forced to proceed only under 8523(2)(A)'s denial of a discharge.1 When the state court remedy of restitution involves a bankrupt debtor who has issued a bad check, the creditor should be enjoined from enforcing the judgment until the bankruptcy court can evaluate the claim to determine its dischargeability. The creditor should be allowed to proceed in a state court criminal action to uphold the crimial laws of the state, allowing the state to determine criminal liability in a court equipped to adjudicate criminal matters. If the evidence does not support a criminal conviction for fraud, then no recovery by the creditor under 8523 should be allowed by the bankruptcy court. In all cases, the bank- ruptcy court should evaluate the restitution order to determine whether it is based on fraud or moral turpitude and therefore nondischargeable. * Associate Professor of Business Law, University of Connecticut 65

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