Facing an impending utility shut-off due to unpaid bills can be a daunting prospect. Electricity, gas, water and telephone are essential services, and loss of them can affect your health and security. Utility debts usually reach this state of emergency as part of a larger financial crisis. Fortunately, bankruptcy can provide a temporary reprieve and a chance to resolve your general debt problems.
Filing for bankruptcy triggers what is called an automatic stay: a legal injunction that halts most collection actions. It also temporarily blocks utility shut-offs. For 20 days after filing a Chapter 7 bankruptcy (or 30 days for a Chapter 11), your water, gas, electricity, and even phone service are protected from disconnection, even if you haven’t paid anything.
In order to prevent a utility shut-off using the automatic stay, you may have to make an emergency bankruptcy filing. The packet of bankruptcy forms that must be completed can be more than 50 pages long. An emergency filing lets you submit only the petition and a few other documents and then file the remaining ones within 14 days. The automatic stay takes effect upon the initial filing.
After the 20- or 30-day period expires, the utility company may request “adequate assurance” of payment for future service. This usually means a cash deposit equal to two or three months of estimated service, but it can also be a letter of credit, a surety bond or another form of assurance that both the utility and the bankruptcy trustee agree is satisfactory.
If you can’t provide adequate assurance, the company can resume threats of disconnection. However, there may be other options available, such as bill-averaging plans and reduced-rates for low-income people. Usually, a future shut-off can be avoided if the utility company is reasonable.
Keep in mind these important considerations:
- Disconnections before filing — If your service was already shut off before filing, bankruptcy likely won’t get it automatically turned back on. You’ll need to negotiate with the company to work out payment of any outstanding balance.
- New bills are not covered — The automatic stay applies only to bills accrued before filing. You’ll still be responsible for paying for services used after you file. Likewise, a bankruptcy discharge covers only pre-petition bills.
- Chapter 13 requires partial repayment — Past-due utility bills can be included in the monthly Chapter 13 plan payments, which typically begin 30 days after the petition filing. Only a portion of those bills typically need be repaid, but regular bills going forward must be paid in full.
Facing a utility shut-off is stressful, but bankruptcy is a powerful tool to buy time, explore solutions and keep your essential services running. A qualified bankruptcy attorney can help you navigate the process so that it serves as a lifeline in your time of need.
Jeff Field & Associates assists people with debt problems throughout the Atlanta metropolitan area and beyond. We have offices in Athens, Douglasville, Gainesville, Lawrenceville, Marietta and Scottdale. To schedule an appointment, call 404-381-1278 or contact us online.