December 1, 2020
Alabama Attorneys Guiding Individuals through Financial Reorganization
If you are thinking about filing for bankruptcy, you may be concerned about the effect of bankruptcy on utility services, such as gas, sewer, water, electric, or telephone bills. Many debtors fall behind on their utility bills and have questions about whether they will lose service altogether by filing for bankruptcy. Or they may be worried about whether these debts are dischargeable. At Grainger Legal Services, our Alabama bankruptcy lawyers can advise individuals on these concerns.
The Effect of Bankruptcy on Utility Services
If you are in danger of a utility shut-off, you should be aware that Chapter 7 bankruptcy can potentially give you immediate relief. However, if you want to continue to receive utilities, you will need to provide adequate assurance or proof of being able to pay future utility bills within 20 days of filing for bankruptcy. Normally, this requires a deposit equal to the amount you are seeking forgiveness of so bankruptcy usually does not really help with utility debts.
It is crucial to list any delinquent utility bills as debts in your petition. As long as you include the utility companies as creditors in the debt schedules in your petition, the utility companies will receive notice that you have filed for bankruptcy and that an automatic stay has gone into effect. This ensures that your utility services are not terminated because of delinquent accounts. Under 11 U.S.C. Section 366, a utility company is not allowed to refuse or discontinue utility services because you have arrearages on your account when you file for bankruptcy.
The automatic stay will also stop the utility services from calling you about your debt or suing you for any overdue amounts. However, you will continue to be responsible for paying new debts for your utility services as they come due. If you do not pay them, the utility company can terminate your service for that reason.
If you have stopped using particular services, such as cable services, the past due amounts are usually considered unsecured debts that may be discharged. However, this may not be the best strategy for handling this debt. In Alabama, the Alabama Power Company has a monopoly on power, and unless you are no longer in Alabama, you will have to pay back what you owe. Similarly, water bills usually must be paid off if you want to use the same utility in the future. In other words, you can get a discharge, but you would only take a discharge if you did not need the utility service in Alabama any longer.
When filing for bankruptcy, you should be aware that if you were required to put down a security deposit with the utility company when you opened an account, the utility company can apply the security deposit towards a past due account, even if you filed for bankruptcy. Moreover, there is the risk that a utility company may require you to submit a security deposit as a condition for continuing to provide utilities to you in the future. In some cases, it may be appropriate to request that the court reduce the amount of the deposit.
Explore Your Bankruptcy Options with an Alabama Lawyer
Shelter and utilities are basic necessities. It can be stressful to be behind in utility service payments. At Grainger Legal Services, our Alabama bankruptcy attorneys can counsel people on the effect of Chapter 7 or Chapter 13 on their utility services, as well as any other issues that come up in connection with the bankruptcy process. We have offices in Montgomery, Prattville, and Troy. Call us at (334) 260-0500 or contact us online to schedule a free consultation.