With the coldest months of the year just beginning, many family households that are in debt are wondering how the cold will affect their access to steady utility service. This blog is one part of a series covering frequently asked questions about utilities and debt relief through filing for bankruptcy in Minnesota. If your debts are significantly compromising your quality of life or if you are simply unable to pay your debts, you’ll likely be able to find permanent debt relief by filing for bankruptcy. Chapter 7 bankruptcy is the most commonly filed type of bankruptcy, and it works to liquidate your non-exempt assets in exchange for the discharge of your debts, meaning that your legal contractual obligations to pay your debts are nullified. With the help of Behm Law Group Ltd. attorneys, you can work through a Chapter 7 case and receive permanent, effective debt relief in Luverne, MN.
For those already struggling to make debt payments, utility bills can fall lower and lower on the priority list of bill paying. When utility debts start to stack up, you run the risk of service shut-off and/or potential creditor harassment. Filing for bankruptcy will most likely solve such problems. The following FAQs cover some points about how utility debts are handled in bankruptcy.
Can filing for bankruptcy stop my utilities from being shut off?
Typically, yes. When you file for bankruptcy relief, the automatic stay injunctive mandates of 11 U.S.C. § 362 go into effect against your creditors. This means your utility creditors will not be able to collect on the utility debts you owe, and they will not be allowed to deny you services, as long as you continue making your current utility payments that come due after the date you filed for bankruptcy relief. All utility debt that you owe the utility provider as of the date that your case is filed will be discharged. However, under 11 U.S.C. § 366, a utility provider may require a reasonable deposit from you within 20 days after your bankruptcy is filed in order to continue providing utility services.
Since I filed for bankruptcy, why did my utilities still get shut off?
While there are some rare cases when the automatic stay would not apply, you should immediately see the positive effects of the automatic stay on all creditor collection activities. If you’ve filed your petition and your utilities do get shut off, you should immediately contact your attorney. Typically, your attorney will provide proof of your bankruptcy filing to the utility provider and the utility provider will reinstate your utility services. Under 11 U.S.C. § 366, however, you will have to work with your attorney to provide a reasonable deposit to the utility provider within 20 days in order to have the utility services continued.
How are utility bill debts treated in bankruptcy?
Utility bill debts are unsecured debts and the amounts you owe the utility providers on the date that your bankruptcy case is filed will be discharged. In Chapter 7 bankruptcy, unsecured creditors sometimes receive payments from the Chapter 7 trustee if the trustee is able to transact/sell non-exempt assets (assets you are not able to protect in Chapter 7 bankruptcy with your bankruptcy exemptions). However, in most Chapter 7 bankruptcy cases, the bankruptcy exemptions are more than adequate to protect all of a person’s assets and unsecured creditors, including utility providers, get paid nothing. Along with credit card debt and medical bills, utility debts are fully dissolved in Chapter 7 bankruptcy. If the majority of your debts are unsecured, Chapter 7 bankruptcy is the quickest, most effective debt relief tool.