Bankruptcy and Past-Due Utility Bills

light-bulbCan bankruptcy help if I’m behind on my utility bills? What if my service has already been cut off?

As I write this post, the Indianapolis area is (hopefully) nearing the end of an extremely harsh winter. When temperatures are as low as they’ve been, having the electricity or gas disconnected could be a safety issue, and not just an inconvenience.

Of course, regardless of the weather, utilities are among life’s necessities. So if you have past-due utility bills, you may be wondering what will happen if you file for bankruptcy.

Bankruptcy Keeps the Lights On

The Bankruptcy Code prohibits a utility company from refusing or disconnecting service just because you’ve filed for bankruptcy, or because you have an unpaid bill for pre-bankruptcy service. If you’ve already been disconnected, the utility needs to restore your service right away once your case is filed.

When a customer who files for bankruptcy has a past-due balance, most utility companies will assign a new account number. This new account starts with a zero balance as of the date of your bankruptcy petition. Meanwhile, the old account with the pre-bankruptcy service charges will be wiped out by the bankruptcy discharge.

It’s important that you pay the new account in a timely manner. As a general rule, your bankruptcy won’t keep you from getting disconnected if you don’t pay charges that were incurred after your filing date.

Security Deposits

Under the Bankruptcy Code, the utility company may require you to pay a security deposit within 20 days of your bankruptcy filing. The purpose of this deposit is to help ensure the utility gets paid for the post-bankruptcy service. If a deposit is required, a common amount is twice your average monthly bill. Ask the utility company about payment arrangements if you’re unable to pay in a single installment.

Matt Conrad is an Indianapolis bankruptcy attorney and the founder of Conrad Legal LLC, which helps people in Central Indiana get out of debt with Chapter 7 and Chapter 13.

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