Of course it would be best if you could offer to pay them all or part of what you owe them from the check you want to cash. However, things are hardly ever that easy, and you undoubtedly have a use for the funds.|
Unless your deposit account agreement provided for an ability of the bank to recover charged-off amounts from checks you wish to cash, we don't believe that your bank should withhold funds from the check. Although we have heard of banks who have attempted to recoup losses in such a way, we don't think that most banks do so or would catch the fact that you owe them money when you're trying to cash a check.
It is likely, however, that when your bank closed out your overdrawn account, it reported the charged-off balance to a credit reporting agency. If that is the case, you may have problems trying to open an account at another institution if the new institution learns of the charge-off when checking your credit history. You can lessen the effect of the charge-off on your credit history by taking steps to pay off what you owe, even if you have to do so over time.
Published on BankingQuestions.com 3/21/07