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Can You Claim Utility Bills in Bankruptcy?

Can You Claim Utility Bills in Bankruptcy?

Bankruptcy can be a challenging experience, but it helps release you from most of the debts you owe to multiple creditors. Once you file for bankruptcy, all your creditors receive notice of stay against any debt collection activities.

When declaring bankruptcy, you might get rid of most of your debts, but you might wonder what happens to your utility bills. Does bankruptcy clear utility bills? Let’s find out.

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Can Utility Bills Be Claimed in Bankruptcy?

Any delinquent utility bills you might have are considered as your debt and should be added to the list when you are filing for bankruptcy. Since this debt is dischargeable, the company can terminate your service due to an unpaid bill. If you have an old utility account,  bankruptcy will terminate the debt from the former residence.

Moreover, you would also be responsible for paying for your post-bankruptcy utility bills. When you begin filing for bankruptcy protection, you may fall behind on your utility bills, including telephone, gas, electric, sewer, and water bills. This would mean you would wonder how these bills would be managed during your bankruptcy. Here are a few things you need to know:

  • First of all, make sure the outstanding utility bills have been listed as debts in your bankruptcy. When you are filing for bankruptcy, you have to list all of your delinquent accounts, including the ones you might not think of as debts and the accounts you intend to keep paying, as the utility bills.
  • When you include utility companies as creditors in your bankruptcy, an official notice will be sent to the utility company informing them about your bankruptcy. This ensures that the company doesn’t stop the utility services because of your delinquent account before the bankruptcy.
  • When your bankruptcy gets accepted in court, the automatic stay is activated immediately. Aside from certain exceptions, this automatic stay prevents the creditors from making further debt collection efforts on all the listed delinquent accounts on your bankruptcy, including the utility bills.

Therefore, the utility company can’t collect the due utility bill once the bankruptcy protection has been activated, but they can still disconnect your services. To have the service reconnected, the utility provider will generally ask for a bond to offset any future losses. You will be responsible for new bills after the bankruptcy.

Utility Bills in Business Bankruptcy

As mentioned above, the same applies to business bankruptcy. Once the bankruptcy has been filed and approved, the utility companies can shut off the services if the bills are unpaid.

Utility bills come under the unsecured debts, which are the debts that aren’t tied to a certain property. Bankruptcy covers almost all of the unsecured debts, including:

  • Phone, electricity, gas, water, and internet bills
  • Accounting, legal & medical fees.
  • Unpaid rent and overdrawn bank accounts
  • Store cards and credit cards
  • Unsecured payday loans and personal loans

Most of these debts do get released once the bankruptcy ends. Utility bills are treated as personal loans, medical bills, and credit cards in bankruptcy. However, if you managed to file for bankruptcy and your utility bill is unpaid, the bankruptcy can’t prevent the company from disconnecting your services.

In case you have an old utility account, from a former residence, along with an account for your current residence, the bankruptcy will terminate the debt from the former residence. But if the current residence account is unpaid and included in the bankruptcy, the utility provider can (and often does) disconnect that service.

To have the service reconnected, the utility provider will generally ask for a bond to offset any future losses.

Utility Bills After Bankruptcy

While the utility bills of previous utility account gets cleared in the bankruptcy,  you might wonder what happens after the bankruptcy. After the bankruptcy, all extinguished and provable debts before the bankruptcy get cleared but must be resumed after the bankruptcy.

Provable debts are ones the creditors are entitled to get paid in dividends in the bankruptcy, while extinguishable debts are the ones the bankrupt individual doesn’t pay after bankruptcy discharge. All essential services, like TV, phone, electricity, gas, and water bills are extinguished and provable debts.

To maintain the required service from the utility provider, you have to continue making regular utility payments during and after the bankruptcy.  If you neglect to make the utility payments on time, your services can be terminated based on this. When you get disconnected from the due utility bills before the bankruptcy was filed and want to establish these utility services at a different location, you might be asked by the utility company to make a security deposit.

Filing a bankruptcy claim will prevent the utility company from collecting the payment for your past outstanding bills, but if you don’t pay the outstanding bill your service could be disconnected.

Moreover,  you still have to continue paying the current bills and the bills that come after becoming bankrupt. If the utility company terminates the service, you may have to pay a bond or security deposit to get your utility reconnected to offset any future losses for the utility company. You would have to ensure that the utilities have been listed in the bankruptcy schedules. You can always make the changes if you forgot to include them earlier.

Moreover, it is highly recommended that you consult a bankruptcy consultant to ensure that it is the only viable option available for you before you make the decision and to help you go through all the paperwork so that the process goes smoothly. If you have more questions or would like to discuss bankruptcy and utility bills, contact us for a free consultation.

 

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