Can You Claim Utility Bills in Bankruptcy?
Overdue utility bills and bankruptcy options when in financial distress and during the Bankruptcy process can be challenging experiences, but declaring yourself bankrupt will 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. This means they cannot contact you further regarding your debt and they must deal with your bankruptcy trustee. When declaring bankruptcy, you might wonder, Does bankruptcy clear all debts? You can read more about this in another article on our site.
Utility Bills and Bankruptcy
Any delinquent utility bills should be considered, as your debt must be added to the list when you are filing for bankruptcy. Since this debt is dischargeable, the utility company can terminate your service due to an unpaid bill. For example, if you have an old utility account from the former residence, then bankruptcy will remove the debt.
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 these bills would be managed during your bankruptcy. Here are a few things you need to know:
- First, ensure the outstanding utility bills have been listed as debts in your bankruptcy. When filing for bankruptcy, you must list all your delinquent accounts, including the ones you might not think of as debts and the accounts you intend to keep paying, such as 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 bankruptcy.
- The “automatic stay utilities” will be activated immediately when your bankruptcy is accepted in court. Aside from certain exceptions, this automatic stay prevents the creditors from making further debt collection efforts on all the listed delinquent accounts in your bankruptcy, including the utility bills.
- Once your bankruptcy is completed, usually after three years and one day, you will be responsible for paying for your post-bankruptcy utility bills.
Business Utility Bills When You Go Bankrupt
In a business insolvency or company liquidation, once the documents have been filed and approved, the utility companies can shut off the services if the bills are unpaid.
Utility bills come under unsecured debts, which are debts that aren’t tied to a specific asset or property. Bankruptcy or personal insolvency covers almost all of the unsecured debts, including:
- Phone, electricity, gas, water, and internet bills
- Accounting, legal, and medical fees
- Unpaid rent and overdrawn bank accounts
- Store cards and credit cards
Most of these debts do get released once the bankruptcy ends. Utility bills are treated the same as personal loans, medical bills, and credit cards in bankruptcy.
However, if you managed to file for bankruptcy and your utility bill is unpaid, bankruptcy can’t prevent the company from disconnecting your services.
Is the utility company refusing or discontinuing service?
If 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 existing residence account is unpaid and included in the bankruptcy, the utility provider can and often does disconnect that service.
To reconnect the service, the utility provider will generally ask for a bond to offset future losses.
Utility Bills After Bankruptcy
While the utility bills of the previous utility account get cleared in bankruptcy after bankruptcy, all extinguished debts before bankruptcy get cleared but must be resumed after bankruptcy.
Provable debts are ones the creditors are entitled to get paid in dividends in 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 utility provider’s required service, you must continue making regular utility payments during and after the bankruptcy. If you neglect to make the utility payments on time, the utility provider can terminate your services based on this.
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 unpaid bill, your service could be disconnected, and the utility company might ask you to make a security deposit.
Andrew Bell Bankruptcy Advisor
With over 30 years of experience in debt solutions and bankruptcy in Australia Andrew can find a solution for you.
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