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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: 



                   Madelyn M. Huffmire*


       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

       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


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