How to cash a large check without a bank account?

February 29, 2012 7:43 PM

Is it possible to cash a life insurance check (for a large amount), without having a bank account? What if the person has outstanding student loan debt?

Asking for a friend: said friend has an outstanding student loan, for around $30K. He's been "off the grid" for almost a decade, for this reason. No bank accounts, doing oddjobs for cash, etc. His father just passed away, and he's received a check for the life insurance claim in the amount of $19K. After living at home taking care of his father while he was ill, he wants to use this money to move, start over, etc. However, he's afraid to open a bank account to cash the check, afraid that he'll suddenly be "on the radar" and the money will be taken for repayment of his student loans and he'll be left with nothing.

Is there any way around this? Perhaps getting a cashier check from the insurance agency? Could the check he has now be signed/endorsed over to a trusted friend and deposited in their account? Perhaps the only option is for him to open his own bank account. If so, I believe the bank has to notify the IRS of any transactions over $10K. Can that money then be claimed for his student loan repayment? I'm completely ignorant of how he can workaround this - thanks for any help you can give, Mefites!!

posted by charlie22 to work & money (9 answers total)

I believe he can open a free checking account somewhere, deposit the check, wait a few days for it to clear then take it all out as cash and close the account. No one is going to come along and take that money from his account to put towards his student loan. I suppose a company could seize it if ordered by a court, but I don't think that can happen if your friend is not involved in a case with the lender. If your friend has ever been sued for not paying back his loans then there might be a problem, but I'm not sure.

The reporting over $10k is for tax payment purposes. Your friend should still pay taxes on that money, if applicable. But once the money is in hand there's not much anyone can do about it if he does not need credit because they can't put him in jail for being a debtor.
posted by imagineerit at 7:49 PM on February 29, 2012 [1 favorite]

Actually a court could have his assets seized.. but again, he'd have to be involved in a civil case over his loan repayment. I don't think the government or bank is going to report to the lender that you've got this money.
posted by imagineerit at 7:53 PM on February 29, 2012

However, he's afraid to open a bank account to cash the check, afraid that he'll suddenly be "on the radar" and the money will be taken for repayment of his student loans and he'll be left with nothing.

That doesn't happen. There's no such thing as a standing bank levy that is hovering in the bank-o-sphere waiting for someone to deposit a check in a bank, somewhere in the U.S., that clamps down on funds the minute a check clears.

The creditor has to know where your bank is. They have to send the levy order when there's money in the account. There is nothing to stop your friend from opening an account and withdrawing the money after the check clears, as long as a creditor doesn't know where to look. Yes, for cash transactions a report will have to be submitted to the federal government (he will need to bring a valid government-issued photo ID for this). That report is only to provide a paper trail for things like possible moneylaundering and suspicious tax-avoidance transfers, not to tip off bill collectors. If your friend has been off the grid for ten years, the creditors will have no clue what city your friend is in, or what bank he may turn up at with the check, so the chances appear to be pretty much nil that the creditors will catch up with him with a levy order, at the bank, during the time when the money is deposited there. They really have no way of knowing where to even look for him.

Creditors, when they know a city where a debtor lives, will have levies sent to every major bank in that city in hopes that the person has an account there with funds in it. But if the person does not have an account in that bank, the levy goes away. If the person does have an account there, and the levy is for $30,000, but the person only has $10,000 in the account, the $10,000 is taken, and the levy goes away, and a new levy has to be issued to get more money (i.e., the bank doesn't hold onto the levy order until the $30,000 is satisfied. It takes whatever is in the account at the time, up to $30,000, but a new levy would have to be issued for further seizures).

(I speak from personal experience.)
posted by jayder at 7:57 PM on February 29, 2012 [2 favorites]

Some time ago my car was totaled in an auto accident, and I received a greater than $10K check from the other driver's insurance company. I do have a checking account, but I was curious if a checking account would be required to receive these funds, so as an experiment I looked for a way to receive the funds without using my checking account. I found that it was indeed not necessary to have an account. I was able to cash the check by going to a branch of the bank upon which the check was drawn and telling them I wanted to cash the check. However, they really didn't like to do this, all told it took about an hour. The teller tried a couple of times to persuade me to deposit it in my own account, when I insisted on cashing it they took a copy of my fingerprints, carefully compared my name and appearance against a state issued ID, the bank manager personally verified the account holder's signature on the check, and they took the time to call the account holder's home branch to make sure the check wasn't a duplicate.
posted by RichardP at 8:52 PM on February 29, 2012 [3 favorites]

If I were him I would call my student loan people, work out a repayment plan, get his loan rehabilitated the is usually 3 to 6 months of paying on the loan, then cash that check. If they loan is that old he may also be able to get them to write it down.

I had 20k in student loan debt that I allowed to default. I was offered a chance to settle the whole thing for 10k. Unfortunately I was working for Borders for $7.20 an hour at the time, so I did what he did. I hid. When they caught up with me a threatened to garnish my wages I was ready to quit that job anyway. It was a few years before they found me again. By this time the payments weren't a hardship.

This is not the way to go by any means. I was young, dumb, and fighting depression. I probably paid my loans once again over.

I'd call them, find out if what they would take to settle the whole thing right now, if that's under the 19k I'd sign it over. Imagine what kind of job he could get if he weren't hiding?

He could maybe feel proud of what he's doing, etc.
posted by cjorgensen at 9:20 PM on February 29, 2012 [3 favorites]

Call the issuing bank on the check and see if they will cash the check.
posted by zippy at 9:53 PM on February 29, 2012

Tell your friend:

Condolences on the loss of your father.

Do not sign the money over to anyone. Choose a bank or credit union, open a savings account and deposit that check. What you should really do before anything else is speak with a reputable accountant or financial advisor about your debt, the money you have just received and the safest, most conservative ways to invest that money.

Your paranoia has got the best of you -- it's actually holding you back. Imagine: you could be using that money to make more money (read: interest). Surely you wouldn't want any "trusted friend" reaping the benefits of your misplaced fears.

Seconding what cjorgensen said:

Imagine what kind of job he could get if he weren't hiding?
He could maybe feel proud of what he's doing, etc.

Be brave. Talk to an accountant.
posted by xndr at 6:59 AM on March 1, 2012

I worked at a retail bank and at the time I had high enough transaction authority to do that transaction without needing approval from anyone else.

If your friend goes to the bank that the check is drawn on (and there might not be one in their area of the country depending on who the insurance company uses so this might be the biggest issue) they might be able to cash the check. They'll probably charge a fee ($10 or so), in my state (Minnesota) the law requires a thumb print on the check by the person cashing it, and a "currency transaction report" (CTR) will get filed in case your friend is laundering money (which isn't actually a big deal as long as they aren't laundering money).

That said, if they came to me to approve that transaction, it would throw up all kinds of alarms in my head. That kind of transaction would be very rare and, with an amount that size, it's a huge red flag. The stakes are pretty high. If the bank finds out later that it was actually fraud they'd simply be out the money, they might lose the insurance company as a company, and even if I followed policy to the letter I'd probably be fired. So, essentially what your friend would be asking me is, "Do I feel confident enough in authenticity of this transaction to stake my job on it?" You can imagine that I would need to do a metric sh*t-ton of research before I handed the money over.

If that is still what your friend wants to do they'll want to call the branch he intends to go to before hand for two reasons. First, it will give them time to research the hell out of the transaction to they be as certain as possible that everything is on the level. Second, they might want to order some extra cash to have on hand. Depending on the size of the branch and a few other things, a transaction that size might clean them out.

As to your other question. Yes, your friend could sign the check over to someone else by signing the top line on the back and then writing, "Pay to the order of ". "The other friend" would then sign it and deposit it. If it were me, I'd put as long a hold on that deposit as federal law (Regulation CC) would allow, probably 7 business days.

Be aware that even if your friend opens an account (in which case the check will still be subject to a hold) and withdraws the money a little bit at a time, something similar to a currency transaction report called a "suspicious activity report" (SAR) might still get filed. It's basically for situations in which is looks like someone is trying to avoid have a CTR filed. If he withdraws $9,999 in cash, they'll definitely file a SAR but a lot banks will check for weird patterns of transactions (frequent cash withdrawals being one of them) that might look like money laundering. Again, as long as they aren't trying to dodge their taxes or laundering money, it isn't a big deal but it's a slightly bigger deal than a CTR.
posted by VTX at 7:03 AM on March 1, 2012

Thanks everyone for your help! Even though I didn't mark them as best answers, thanks to cjorgensen and xndr - I agree with you both and continue to nudge him in the direction of taking care of his debt so that he's not living under it the rest of his life. Thanks again!
posted by charlie22 at 6:27 PM on March 1, 2012