Holding a Post-Dated Check As Collateral for a Loan

Good day law experts

I have a question regarding lending money to someone. So there this kid(student) at my workplace who needs a little bit of money to pay for college. She asked for $1200 and even agreed on $100 extra for repay ($1300). Even though I know she makes more than that amount in a month, I asked for collateral. She told me she has nothing of value but proposed to write a post dated cheque. I was wondering if this is a legal practice. I live in California and do not know if this is going to be headache or not. Could someone shine some light on the legality of this matter?

Cheers

Your spelling implies that you are in Canada, the UK or another British Commonwealth country. Before anyone goes to the trouble of looking up laws for you, would you explain that discrepancy, please?

Yes! Education in U.K is slightly different. Anyways... As I already mentioned I live in 'California' and the transaction will be in USD. I hope that I solved your conundrum.

I'm Canadian born myself. But we've had plenty of people claim to be in one place when they actually were in another.

Personally, I'd think twice about loaning money to someone whose only "collateral" is a post dated check.

Writing a post-dated check is not illegal if the person writing the check will have the funds (in the account) to cover the check on check date. Otherwise, there is a question of intent to defraud and it could be a criminal matter.

A post-dated check is not worth much as collateral. If she doesn't have the money to pay for college now what makes you think she will have the $1300 to pay back the loan when due?

Actually, I can't vouch for CANADA but in the US, the date on the check is entirely immaterial. The holder is free to present the check and the bank will honor it even if it is post dated.
If there are not funds at the time it is presented, there can be criminal action.

Thanks everyone

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Quoting budwad

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Writing a post-dated check is not illegal if the person writing the check will have the funds (in the account) to cover the check on check date. Otherwise, there is a question of intent to defraud and it could be a criminal matter.

A post-dated check is not worth much as collateral. If she doesn't have the money to pay for college now what makes you think she will have the $1300 to pay back the loan when due?

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As long as I have a cheque in my hand, I must be safe, am I not? I could use bad check restitution program?

No, you are not safe. Like any bad check written, you will be the one who is going to have to sue for the money in small claims court here in the US to recover the money owed. And that just gets you a judgment that you have to pursue and execute. Any criminal charges for writing a bad check is another matter. You may never see your loan money again.

You must have a reason why you are looking for a rational to loan this person the money. I suggest you think with the big head and understand that a post-dated check is not collateral. If you want to loan the money, be willing to lose it in your quest for whatever.

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Quoting Barman

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Thanks everyone
As long as I have a cheque in my hand, I must be safe, am I not? I could use bad check restitution program?

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No, you're not safe.

Only an idiot would lend money on a post dated check. Especially to a girl you met in a bar. You must be thinking with the lower brain instead of the upper brain.

Sure, you can use a bad check restitution program but that doesn't mean you'll ever see a nickel if she doesn't have any money and you'll be right back here whining "What are my rights?"

Advice: Don't do it.

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Quoting flyingron

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Actually, I can't vouch for CANADA but in the US, the date on the check is entirely immaterial. The holder is free to present the check and the bank will honor it even if it is post dated.
If there are not funds at the time it is presented, there can be criminal action.

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Actually, as a general rule, a prosecutor is not going to be interested in trying to prosecute a NSF / bad check case over a post-dated check deposited early, because as written it's a promise to pay in the future. There is no promise that the check will be valid prior to that date.

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Quoting Mr. Knowitall

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Actually, as a general rule, a prosecutor is not going to be interested in trying to prosecute a NSF / bad check case over a post-dated check deposited early, because as written it's a promise to pay in the future. There is no promise that the check will be valid prior to that date.

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Indeed, the California Department of Consumer Affairs states pretty much the same thing on its page concerning postdated checks:

"The presentation of a postdated check is not subject to the civil or penal sanctions" that would normally apply to someone who wrote a check with insufficient funds because the postdated check promises "to discharge a present obligation at a future date" and that money would be available to meet the debt when the check is cashed.

Very generally a post dated check is not worth much as collateral for your loan. The borrower can clean out the account before the payment becomes due leaving you without the money and in basically the same position as if you had not taken anything to try to secure the loan as you are left with suing to collect your money. If you want security, get something as collateral that has value in and of itself and is not dependent on the borrower putting funds in an account later on.