Filing Bankruptcy Stop Utility Shut-Off

Snowy-Meter-200x300As I write this blog post in December, the thermometer has climbed to a scorching 15 degrees Fahrenheit on the snow blown Nebraska plains.   It occurs to me that this may be a good time to discuss how filing bankruptcy in Nebraska can stop a utility shut-off.

Section 366 of the Bankruptcy Code provides that “a utility may not alter, refuse, or discontinue service to, or discriminate against . . . the debtor solely on the basis of the commencement of a case under this title or that a debt owed by the debtor to such utility for service rendered before the order for relief was not paid when due.”

Upon the filing of a bankruptcy case, the utility cannot shut off its service.  However, the utility will require the debtor to pay a new security deposit within 20 days to continue future service.

YOU MUST PROVIDE A NEW SECURITY DEPOSIT WITHIN 20 DAYS TO CONTINUE SERVICE.

After the bankruptcy case is filed the utility company will demand a new security deposit be paid within 20 days.  The security deposit is typically based on the average monthly utility bill over the last 12 months of service.  Failure to pay the new security deposit will result in a utility shut-off.

SHOULD YOU FILE BANKRUPTCY ON THE UTILITY COMPANY?

Sometimes it is a bad idea to list a utility company as a creditor in bankruptcy.  For example, if you owe $50 to the electric company and elect to list this debt in the bankruptcy case, you may have to pay a new security deposit of $200 within 20 days.  Or perhaps you have already worked out an arrangement with the utility to repay $25 of the past due bill each month and it is probably more affordable to pay that small amount each month than to come up with a new security deposit.

WATCH OUT FOR SERVICE AT OTHER PROPERTIES.

If you receive utility service at more than one location (perhaps you own a business or rental properties), listing the utility as a creditor for a bill owed by one of your properties may result in a new security deposit being demanding based on the service provided to all of your properties.

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