Sadly, your current financial standing may have you struggling to pay your monthly bills, including your monthly credit card bills, housing bills, and utility bills. You may be so behind on your payments that your utility company threatens to shut off your electricity, water, gas, and/or telephone. If your situation ever gets to this point, filing for bankruptcy provides limited, time-sensitive protections that can prevent the sudden loss of utilities under certain circumstances. Follow along to find out whether an automatic stay can prevent utility shutoffs and how a proficient Louisville, Kentucky Chapter 7 bankruptcy lawyer at Schwartz Bankruptcy Law Center can step in.
What an Automatic Stay Does in a Kentucky Bankruptcy Case
When you declare bankruptcy in Kentucky, it’s important to understand that you will be immediately granted an automatic stay. This is a court order that prevents most creditors from continuing collection efforts while your bankruptcy case is ongoing.
What the Automatic Stay Generally Stops
- Lawsuits and collection efforts for unpaid debts
- Foreclosures proceedings and repossessions
- Wage garnishments or bank levies
- Judgment lien enforcements
Does the Automatic Stay Alone Prevent Utility Shutoffs?
While the automatic stay can help stop a considerable number of creditor actions, utility companies are treated differently under federal bankruptcy law. This is because these utility companies provide essential services. Bankruptcy law looks to balance a debtor’s need for these services with a utility company’s right to avoid future missed payments. As such, additional requirements apply.
How Utilities Are Handled Differently Under Bankruptcy Law
- Utilities cannot be shut off solely because you filed for bankruptcy
- Utilities cannot be shut off based solely on pre-bankruptcy arrears
- Utility companies can require proof that you will pay future utility bills
- These protections are applicable once the bankruptcy court receives your petition
The 20-Day Rule That Determines Whether Utilities Stay On
Bankruptcy law allows utility companies to require adequate assurance of future payments. Unfortunately, this strict requirement is often overlooked by filers. However, it’s necessary to understand that if adequate assurance is not provided within 20 days of filing for bankruptcy, not when the utility company receives notice of your filing. As such, the utility company is within its legal right to discontinue service, even if your bankruptcy case is ongoing.
What Counts as Adequate Assurance
- A cash deposit, typically one to two months’ worth of service
- A prepay arrangement for upcoming bills
- A letter of credit from a financial institution showing your ability to pay
- A certificate of deposit or other secured guarantee
Situations Where Bankruptcy May Not Stop a Utility Shutoff
It’s important to understand that bankruptcy protections are not universally applied, as they are often conditional. As such, you may still experience service interruptions during bankruptcy as a result of certain circumstances in your case.
Common Reasons Why Utilities Are Still Shut Off
- Failure to provide adequate assurance within the 20-day deadline
- Failure to remain current with post-bankruptcy utility payments
- New delinquencies post-filing
- Noncompliance with the utility company payment agreement
What Happens to Past-Due Utility Bills in KY Bankruptcy?
In the event that you have past-due utility bills, it’s important to understand how they are treated during a Kentucky bankruptcy case.
How Utility Arrears are Handled Based on the Chapter Filed
- During Chapter 7 bankruptcy:
- Past-due utilities may be discharged
- Utility companies cannot collect discharged balances once your case is complete
- During Chapter 13 bankruptcy:
- Outstanding utilities may be included in your three- to five-year repayment plan
- Ongoing utility payments must still be made on time.
Kentucky Assistance Programs That May Help With Utility Bills
Lastly, outside of bankruptcy, the state of Kentucky offers several programs to those in Louisville and across the state pay utility bills.
Common Kentucky Utility Assistance Programs
- Low-Income Home Energy Assistance Program (LIHEAP)
- Crisis assistance for heating or cooling emergencies
- Seasonal utility relief programs
Contact Our Experienced Louisville Bankruptcy Team
If you require immediate legal representation for your bankruptcy case, look no further than a talented consumer bankruptcy attorney with Schwartz Bankruptcy Law Center. Our team understands how complicated these matters can be to navigate, which is why we are proud to help those in and around Louisville receive the financial fresh start they deserve. Contact us today to learn more.
