Utility Bills, Shutoffs, and Deposits in Bankruptcy

How does the utility protection in bankruptcy actually work?

Two rules operate together, and they point in different directions.

The first is protective. Under 11 U.S.C. § 366(a), a utility may not alter, refuse, or discontinue service to the debtor, or discriminate against the debtor, solely on the basis that a bankruptcy case was commenced or that a debt for service rendered before the order for relief was not paid when due. The unpaid balance itself stops being a lawful reason to pull the meter.

The second is conditional. Section 366(b) says the utility may alter, refuse, or discontinue service if neither the trustee nor the debtor furnishes adequate assurance of payment for service after that date, in the form of a deposit or other security, within 20 days after the order for relief.

So the filing generally buys a window, not a permanent shield. What happens in that window is what decides whether the lights stay on.

• The old, pre-filing balance is treated as a debt in the case, not as grounds for shutoff.
• Service after filing is a separate, going-forward obligation.
• The 20-day clock runs from the order for relief, not from the day you first talked to a lawyer.

What changes the answer in your situation?

Several facts move this analysis, and most of them are things you already know.

Whether the account is in your name matters. Section 366 speaks to service to the trustee or the debtor. If the meter is in a landlord's or a roommate's name, the utility's relationship is with that person.

Whether the shutoff has already happened matters too. Section 366(a) restrains a utility from discontinuing or refusing service on account of the filing or the unpaid pre-filing debt, but the practical picture of an account already terminated before filing differs from one still running.

Whether you can fund assurance matters most of all. If no deposit or other security is furnished inside the 20 days, subsection (b) gives the utility room to act.

Finally, the chapter you file under can change the mechanics. Subsection (c)(2) sets a different, 30-day rule tied to Chapter 11 cases, which is not the consumer Chapter 7 or Chapter 13 path most readers are on.

• Whose name is on the account.
• Whether service is still on at the time of filing.
• Whether a deposit or other agreed security can be funded within 20 days.
• Which chapter the case is filed under.

What does federal law actually say about adequate assurance?

Section 366(c)(1)(A) defines assurance of payment as a closed list of six things: a cash deposit; a letter of credit; a certificate of deposit; a surety bond; a prepayment of utility consumption; or another form of security that is mutually agreed on between the utility and the debtor or the trustee.

That last item is the flexible one. It is the statutory hook for a negotiated arrangement, but it requires the utility's agreement — it is not something you can impose.

Section 366(c)(1)(B) states that an administrative expense priority does not constitute an assurance of payment. In plain terms, telling a utility it will be paid ahead of other creditors in the case is not, by itself, the security the statute contemplates.

And under § 366(b), on request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment.

Where do state or local rules come into this?

Section 366 is federal and applies the same way whichever state you file in. What varies is the layer underneath it: state utility commissions, municipal providers, and local programs set their own rules on winter moratoriums, medical certificates, payment plans, and how deposits are calculated outside of bankruptcy.

We do not publish a verified figure for every state's deposit rules, and we will not estimate one. Some state provisions in this area have also been repealed rather than replaced — Alabama's utility deposit and refund provision, for example, was repealed effective May 12, 2004 (Ala. Code § 35-12-24). A rule that reads as current on a search result may no longer exist.

Your state hub page and your local court's materials are the right starting points for the non-bankruptcy layer. For the federal layer, the text of § 366 is the whole of it.

• Section 366 itself does not change state to state.
• Shutoff moratoriums, medical protections, and payment-plan rules are set outside the Bankruptcy Code.
• Some older state utility-deposit statutes have been repealed — check currency before relying on one.

What does this look like in practice for a household?

A common sequence runs like this. A household falls behind on the electric bill, receives a disconnection notice, and files a consumer case. The filing operates as a stay under 11 U.S.C. § 362(a) of acts to collect a claim that arose before the case, and § 366(a) separately bars the utility from cutting off service solely because of the filing or the unpaid pre-filing bill.

The utility is listed as a creditor for the pre-filing balance. Within 20 days after the order for relief, someone has to put up adequate assurance for service from that point forward, or § 366(b) opens the door to discontinuation.

Meanwhile, ongoing utility costs are treated as an ordinary living expense in the case. Official Form 106J, Schedule J, has dedicated lines for electricity, heat and natural gas; water, sewer and garbage collection; and telephone, cell phone, internet, satellite and cable services.

• The disconnection threat and the old balance are separate problems with separate answers.
• The going-forward bill still has to be paid.
• Utility costs appear in your budget schedules, which is where the trustee will look at them.

What documents and information should you gather?

Bring the paperwork that shows what you owe, to whom, and for what period. The line between pre-filing and post-filing service is doing real work here, so dates matter more than usual.

Every creditor has to be scheduled. Court guidance is explicit that you must list the claims of all your creditors in your schedules, even if the claims are contingent, unliquidated, or disputed (U.S. Bankr. Ct. D. Ariz., Instructions for Completing the Bankruptcy Petition, Schedules and Statements). A utility with an unpaid balance is a creditor like any other.

You will also need monthly figures for Schedule J, which breaks utilities into electricity, heat and natural gas; water, sewer and garbage collection; telephone, cell phone, internet, satellite and cable services; and an "other" line.

• Recent bills and statements for each utility account.
• Any disconnection or final notice, with its date.
• The exact account name and number, and the service address.
• Records of any deposit already held by the utility.
• Realistic monthly utility costs for Schedule J.

What should you ask a bankruptcy lawyer about utilities?

Utility questions look simple and often are not, because the answer turns on timing and on what your particular provider will accept as security. A local attorney can tell you what the providers in your district usually do.

Useful questions to bring:

What amount of deposit is my utility likely to ask for, and how would we fund it inside the 20 days? Is there a form of assurance under § 366(c)(1)(A) that this provider tends to accept? If the demand is unreasonable, is a request to the court for a reasonable modification of the amount worth making here? How should the pre-filing balance be listed, and does the utility hold a deposit that changes the picture? And how do my utility costs need to look on Schedule J?

A lawyer can also weigh the cost of filing itself against what you are trying to protect. Bringing bills, notices and a written list of questions to a first meeting is the cheapest hour you will spend.

• What deposit is this provider likely to demand, and when?
• Which form of assurance does it accept?
• Is a court request to modify the amount worth making?
• How should the old balance and any existing deposit be handled?

What does filing cost, and how does that compare to a deposit?

If you are weighing a utility deposit against the cost of a case, the court fees are fixed and published, so at least that part of the arithmetic is knowable.

A Chapter 7 case carries a filing fee of $245 (28 U.S.C. § 1930(a)(1)(A), (f)(1)), plus a $78 administrative fee and a $15 trustee surcharge (Bankruptcy Court Miscellaneous Fee Schedule, Items 8 and 9). A Chapter 13 case carries a filing fee of $235 (28 U.S.C. § 1930(a)(1)(B)) plus the same $78 administrative fee.

Attorney fees are separate and are not set by the court. Chapter 13 fees may be payable in installments for an individual commencing a voluntary or joint case, and a Chapter 7 fee waiver is conditional under § 1930(f) and Judiciary procedures.

Frequently asked questions

Will filing bankruptcy stop a utility shutoff?

Filing generally prevents a utility from discontinuing service solely because of the bankruptcy or an unpaid pre-filing bill, under 11 U.S.C. § 366(a). That protection is conditional: under § 366(b), the utility may discontinue service if neither the debtor nor the trustee furnishes adequate assurance of payment for future service within 20 days after the order for relief.

How much of a deposit can a utility require after I file?

Section 366 does not set a dollar amount, and we do not publish an estimate. It requires adequate assurance of payment for service after the filing date, in one of the forms listed in § 366(c)(1)(A). If the amount demanded seems unreasonable, § 366(b) allows a party in interest to ask the court, after notice and a hearing, to order a reasonable modification of the deposit.

Does bankruptcy wipe out my old electric bill?

A pre-filing utility balance is a debt in your case and is scheduled like any other claim. Whether a particular debt is discharged depends on the Bankruptcy Code's dischargeability provisions in 11 U.S.C. § 523 and on your chapter. Separately, § 366(a) stops the utility from using that unpaid balance as grounds to cut off service.

Do I still have to pay for electricity after I file?

Yes. Section 366 addresses service after the filing date as a going-forward obligation backed by adequate assurance — it does not make ongoing service free. Court forms treat utilities as an ordinary monthly living expense: Official Form 106J, Schedule J, has separate lines for electricity, heat and natural gas; water, sewer and garbage collection; and telephone, internet and cable.

What counts as adequate assurance of payment?

Section 366(c)(1)(A) lists six forms: a cash deposit, a letter of credit, a certificate of deposit, a surety bond, a prepayment of utility consumption, or another form of security mutually agreed on between the utility and the debtor or trustee. Section 366(c)(1)(B) states that an administrative expense priority does not constitute an assurance of payment.

Does § 366 apply to a city-owned water or power utility?

Municipal and other government-run providers are not automatically outside the Bankruptcy Code. Under 11 U.S.C. § 106(a), sovereign immunity is abrogated as to a governmental unit with respect to a list of sections that includes § 366 and § 362. How that plays out in a specific case is a question for a lawyer familiar with your provider and district.

Is the 20-day deadline the same in every chapter?

The 20-day rule in § 366(b) is the general one. Section 366(c)(2) sets a separate 30-day period for cases filed under Chapter 11, measured from the date of the filing of the petition, where the assurance must be satisfactory to the utility. Consumer Chapter 7 and Chapter 13 filers are working with the § 366(b) framework.

Can the utility keep a deposit I already paid before filing?

Section 366(c)(4) provides that, notwithstanding any other provision of law, with respect to a case subject to that subsection, a utility may recover or set off against a security deposit provided by the debtor before the filing date without notice or order of the court. If a provider holds a deposit of yours, tell your lawyer early — it changes the negotiation.

Sources

• 11 U.S.C. § 366 — Utility service · official source
• 11 U.S.C. § 362 — Automatic stay · official source
• 11 U.S.C. § 106 — Waiver of sovereign immunity · official source
• 11 U.S.C. § 523 — Exceptions to discharge · official source
• Ala. Code § 35-12-24 — Deposits and Refunds Held by Utilities (repealed effective May 12, 2004)
• U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy — Official Form 106J, Schedule J: Your Expenses
• U.S. Bankr. Ct. D. Ariz., Instructions for Completing the Bankruptcy Petition, Schedules and Statements — Schedule E/F guidance on listing all creditors
• 28 U.S.C. § 1930(a)(1)(A), (f)(1) — Chapter 7 filing fee
• 28 U.S.C. § 1930(a)(1)(B) — Chapter 13 filing fee
• Bankruptcy Court Miscellaneous Fee Schedule, Item 8 — Administrative fee
• Bankruptcy Court Miscellaneous Fee Schedule, Item 9 — Chapter 7 trustee surcharge

Related

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• Chapter 13
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