How does Bankruptcy affect Utility Bills and Utility Services?

As you approach filing for bankruptcy protection, you may have fallen behind on your utility bills, such as your water, sewer, electric, gas or telephone bills.  That raises the question of how those bills should be handled in your bankruptcy.

First, you need to ensure that the delinquent utility bills are listed as debts in your bankruptcy schedules.  In bankruptcy, you are required to list all delinquent accounts, including accounts that you may not think of as “debts” and accounts that you intend to continue paying, such as bills from your current utility company.  Also, by including the utility company as a creditor in your bankruptcy schedules, the utility company will receive official notice that you have filed for bankruptcy protection.  That will ensure that the utility company does not terminate your utility services due to your pre-bankruptcy delinquent account.

As soon as you file your bankruptcy petition with the Court, the bankruptcy automatic stay goes into effect.  With a few exceptions, the automatic stay prohibits all collections efforts by your creditors on delinquent accounts, such as phone calls, billing statements, lawsuits, or termination of utility services.  So, once you have filed for bankruptcy protection, the utility company can no longer collect on your past due utility bill.  Of course, you are responsible for paying new, post-bankruptcy utility charges as they come due.  If you fail to pay the new charges on time, the utility company can collect on those accounts, including termination of utility services.

In addition to the general automatic stay, the Bankruptcy Code has a special section that specifically relates to utility companies: 11 USC §366.  That section provides that a utility company may not discontinue utility services or refuse utility service to you solely because you file bankruptcy or because you are behind on your utility bill when you file bankruptcy.

If your bankruptcy case goes smoothly, the delinquent account eventually is either paid by the bankruptcy trustee or eliminated by the Court’s discharge injunction.

There are two exceptions that you should be aware of.  First, if you had made a pre-bankruptcy security deposit with a utility company, the utility company can take that security deposit and use it as a payment against your past due account.  Second, bankruptcy law allows the utility company to require you to submit a security deposit or other assurance of payment as a condition for providing future, post-bankruptcy utility services to you.  If you do not submit the deposit, then the utility company may terminate your utility services.  The amount of the deposit varies, but it is usually about double your average monthly utility bill.  If you cannot afford the deposit sought by the utility company, you can file a motion with the Court and ask the Court to reduce the deposit amount.

In our experience, utility companies rarely demand a deposit.  However, if you are considering filing for bankruptcy protection, you should be aware of the risk that their utility providers could demand a deposit and should plan for that possibility.  As a practical matter, if you are up to date on your current utility accounts, or if you no longer receive services from the utility company that you are past due with, then utility deposits may not be a problem for you.

If you have questions about your utility bills, you should contact an experienced bankruptcy attorney to discuss the best course of action for your circumstances.

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One Response to How does Bankruptcy affect Utility Bills and Utility Services?

  1. Pingback: Does Debt from Delinquent Utility Bills Get Listed in Bankruptcy? | AllmandLaw

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