Past-due utility bills are unsecured debt you can discharge in Chapter 7 or Chapter 13 bankruptcy, but you must keep paying for current service.
Past-due utility bills are unsecured debt, so you can "discharge" (erase) them in bankruptcy. In Chapter 7 bankruptcy, the court eliminates the entire dischargeable amount at the end of the case. If you file for Chapter 13, you might pay a portion of the bills through your repayment plan, and the court discharges whatever remains when you complete your plan. You'll still have to pay for any utilities you use after you file. Here's how it works.
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Key Factor |
Chapter 7 Bankruptcy |
Chapter 13 Bankruptcy |
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Past Due Utility Bills |
You can discharge them in full without paying anything toward them. |
You'll likely pay some, possibly none, through your repayment plan. The court discharges the rest. |
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Discharge Timing |
At the end of your case. |
After you complete your repayment plan. |
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Utility Bills After Filing Date |
You must pay them, including bills that accrue while your case is open. |
You must pay them and keep them current throughout the three- to five-year plan. |
Discharging Past Due Utility Bills in Chapter 7 Bankruptcy
Chapter 7 discharges past-due utility bills in full, as long as you meet the Chapter 7 requirements and complete the Chapter 7 process. Most unsecured, nonpriority debt is discharged, and utility bills fall into this category. That includes electric and gas debts, phone bills, and internet services. It also includes credit card balances, medical bills, personal loans, and other debts commonly discharged in Chapter 7. (11 U.S.C. § 727.)
Discharging Past Due Utility Bills in Chapter 13 Bankruptcy
Chapter 13 also discharges past-due utility bills, but you might pay some of the balance first. Utility bills are among the last debts paid in a Chapter 13 case. They get nothing until higher priority debts, like recently incurred taxes or support obligations, are paid in full. When money is left over, creditors with this kind of debt share it. That money comes from your "disposable income," so you may end up paying some, or even none, of the utility balance.
After you complete the Chapter 13 bankruptcy repayment plan, the court discharges any balance remaining on the utility bills. (11 U.S.C. §§ 507, 1328.)
Paying Utility Bills During and After Bankruptcy
Bankruptcy doesn't discharge bills for utilities you use after the day you file, so you must keep paying them. If you don't, the utility will eventually shut off your service. You'll remain responsible for any utility bills you incur after filing for Chapter 7, including those that accrue while your case is open. You must also keep up with your current utility bills during the three- to five-year Chapter 13 repayment plan.
Can the Utility Company Shut Off Your Service?
Not just because you filed or because of your old balance. A utility can't refuse, change, or cut off service for either reason alone. However, the utility can ask for a deposit or other security, called "adequate assurance of payment," and it can shut off service if you don't provide it within 20 days after you file. If you think the amount is too high, you can ask the court to change it. Your bankruptcy lawyer can explain more. (11 U.S.C. § 366.)
Utility Fraud and Nondischargeable Utility Debt
Utility debt from fraud isn't dischargeable. In rare cases, a utility company will claim that the customer wrongfully stole utility services. If the utility company proves to the bankruptcy judge's satisfaction that someone committed fraud or willfully and maliciously injured the company, the debt won't be discharged in bankruptcy. Learn more about debts that aren't discharged in bankruptcy. (11 U.S.C. § 523(a)(2), (6).)
Next Steps for Your Bankruptcy Case
Your next step is to gather what you need for the bankruptcy forms and talk to a lawyer. Bankruptcy is essentially a qualification process in which the laws provide instructions for completing a lengthy set of bankruptcy forms. You must complete all forms required in Chapters 7 and 13, even if you have nothing to report, and you can find them on the U.S. Courts bankruptcy form webpage. The bankruptcy document checklist will help you gather what you need to complete the forms and is a great resource for determining what to bring to your meeting with your bankruptcy lawyer. In the meantime, you might want answers to these common questions:
