I deposited a third-party check and spent some of the funds. My bank has now informed me that this check was insufficient (NSF) and that I am liable for the entire amount. Is this correct?

Depending on the circumstances and your State's laws, you may be held responsible for the entire amount of the check that you cash at the bank or deposit into your account.

If your bank credited your account for a check that was later found to be insufficient (NSF), the bank can reverse the funds. As the payee you must pursue the maker of the check for restitution.

A tip that can help avoid this scenario: Use caution when accepting a check from someone you don't know.