when you opened your accounts at your bank (or any financial institution), you agreed to be legally responsible and liable for any financial instrument you deposit into your account.
The same rule applies whether or not the deposited item was indorsed; however, please understand that when you indorse a draft to be cashed, your signature on the back of that draft is a contract that you are accepting full legal responsibility for the draft.
This is generally how a bank account agreement reads:
Your Responsibility
You are responsible for all obligations arising out of the ownership and maintenance of a Deposit Account, including the amount of any check, draft, or other instrument (each, an "Item") deposited to the account and for which the account was credited, any overdrafts to the account created by you or any account owner or authorized user, any service charges to the account, or losses arising from the breach of any representation or warranty you make to us in the Account Agreement or under applicable law, and the costs we incur to enforce our rights under the Banking Documents or to collect any sum you owe us under the Banking Documents, including, to the extent permitted by law, our reasonable attorney's fees.
Is the bank going to come rip the roof from over your head and leave you to starve? No, they can't do that so long as you are aggressive about reaching a repayment agreement that works for both of you.
The first thing you must, must do is put your budget together - money in, money out, quarterly expenses, annual expenses, income taxes, clothing expenses, auto maintenance, the whole nine yards. This is a personal version of an income statement. You will need to do this in order to negotiate with the bank. They can try to come at you with some sort of pre-determined monthly payment, 5-year agreement, but it does them no good if the money is not there. They cannot take your last dime.
If they insist on following such a foolish course, you gather up all the paperwork, including a copy of the agreement and the names, titles, and contact information of those who are pressing the agreement on you, and take the lot to an attorney.
Again, generally speaking, if the bank takes you to civil court, and you can prove that you've made every effort to be reasonable, forthright, and insistent on repaying the bank, then the bank will be forced to accept the repayment ruling of a court-appointed mediator or of the judge. Oh yes, and pay for their attorney's time and court expenses. All courts are not the same, so please consult an attorney who knows your local courts far better than we do.
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