Legal Definitions - paper hanger

A paper hanger is an informal term for an individual who commits a specific type of financial fraud known as paper hanging. This occurs when a person intentionally writes a check, knowing full well that there are insufficient funds in their bank account to cover the payment. The individual relies on the brief period of time, often called the "float," between when the check is written and when the bank attempts to process the transaction, to obtain goods, services, or cash without legitimate payment.

This act is distinct from other forms of check fraud, such as "check kiting," where the writer might deposit funds to cover the check before it clears. In paper hanging, there is no intention to cover the check; the goal is to defraud the recipient.

• Example 1: Retail Purchase

  Imagine someone purchases an expensive gaming console from an electronics store and pays with a personal check. They know their bank account has only a few dollars, far less than the cost of the console. They quickly leave the store with the merchandise before the check can be processed and rejected by the bank.

  This illustrates paper hanging because the individual intentionally issued a check without the necessary funds, aiming to defraud the store of the merchandise. The person, in this scenario, is acting as a paper hanger.

• Example 2: Payment for Services

  Consider a homeowner who hires a landscaping company to completely redesign their garden. Upon completion of the extensive work, the homeowner writes a check for the agreed-upon amount, knowing that their account balance is significantly lower than the payment due. They hope to enjoy the new garden without actually paying for the services.

  Here, the homeowner is a paper hanger because they knowingly presented a check for services rendered without the funds to back it up, intending to avoid payment to the landscaping company.

• Example 3: Personal Loan or Advance

  Suppose an individual needs immediate cash and asks a friend for a loan, offering a post-dated check as a guarantee of repayment. The individual is fully aware that their bank account is nearly empty and has no intention of depositing funds to cover the check when the specified date arrives.

  This demonstrates paper hanging because the individual offered a check as a promise of payment, despite knowing the funds were insufficient and having no intention to make the check valid, thereby defrauding their friend.