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If you are considering filing for bankruptcy, one of the biggest concerns is often: Can they shut down my utility services? The good news is that bankruptcy law provides important protections for services like electricity, gas, water, and sewer. Especially if you are behind or being threatened, often times a bankruptcy filing can provide you some relief.
When you file either Chapter 7 or Chapter 13, something called the automatic stay goes into effect. This immediately stops most collection efforts, including utility shutoffs for past-due balances. A utility company cannot disconnect your service just because you filed bankruptcy or because you owe money from before the filing date.
However, while utilities cannot shut you off for old debt, they are allowed to request “adequate assurance” of future payment. In most cases, this means a security deposit. They typically will request this a week or two after filing, so be prepared for this. If you fail to pay the deposit, the company can legally disconnect your service, even during bankruptcy. This is for a new contract or new service through them. Although past due debt is forgiven, you still need utilities. Thus, they have the right to charge a fee for this new contract. Fees are dependent on specific service providers.
In Chapter 7, past-due utility balances are treated as unsecured debt and are usually discharged (wiped out). You will still need to pay for service going forward, but the old balance is eliminated.
In Chapter 13, past-due amounts may be included in your repayment plan. You will pay some or all of that balance over three to five years, while continuing to pay new monthly bills directly.
Bankruptcy can help you keep essential services running, but you must stay current on new bills after filing. If you are behind and worried about shutoff, timing your filing properly can be crucial. If you are considering bankruptcy, understanding how utilities are handled can give you peace of mind, and help you avoid unexpected disruptions.
CALL NOW FOR A FREE STRATEGY SESSION FROM AN MN BANKRUPTCY LAWYER AT LIFEBACK LAW FIRM
If you are ready, reach out to Minnesota’s kindest and most helpful bankruptcy law firm at www.lifebacklaw.com. Schedule your free consultation today and start the journey to financial freedom and protecting you family.
