Bankruptcy for Tenants: A Method to Maintain or Restore Utility Service

A tenant who files a Chapter 7 or Chapter 13 bankruptcy and owes money to a utility company may restore or maintain their services. 11 U.S.C. § 366(a). 

Chapter 13 Bankruptcy and Utility Debts

Unsecured debts, including utilities, can be discharged. So, utility providers must restore services once the bankruptcy is filed. However, to ensure future payment, tenants typically need to provide reassurance in the form of a deposit. This deposit must be paid within 20 days of the order for relief. 11 U.S.C. § 366(b). 

Chapter 7 Bankruptcy and Utility Debts

The tenant must be current with their rent payments.

• Tenants do not have to include their landlord as a creditor in the bankruptcy filing. Even if the tenant’s landlord becomes aware of the bankruptcy, they generally cannot legally terminate the tenant’s lease or evict them only because of the bankruptcy filing.
• For example: Let's say a tenant lives in public housing and receives a notice of termination due to not maintaining their gas service. The notice gives the tenant ten days to fix the issue. The tenant owes a substantial amount of money for the gas service.  Before the notice expires, the tenant files for Chapter 7 bankruptcy to wipe out their debt and have the gas company restore their services.  Since the tenant cured (fixed)  this violation before the termination notice expired, the Public Housing Agencies (PHA) cannot continue the eviction process.

What if Your Utility Services Have Not Been Terminated When a Tenant Files for Bankruptcy

• If utility services have not been terminated at the time of filing for bankruptcy, the utility company may ask for a deposit within 20 days after your petition is filed. This deposit acts as a guarantee for future payments. However, if your services have already been disconnected, the utility company may demand a deposit before restoring the services. 11 U.S.C. § 366(b).
• If you cannot afford the amount requested as a deposit, you have the right to file a motion to modify the deposit amount. This allows you to explain your financial situation and request a more reasonable deposit that you can manage. 11 U.S.C. § 366(b).

Exceptions: Stolen Utility Services

Bankruptcy cannot cancel any debts owed for utility services that were stolen or acquired unlawfully. If a tenant stole utility services, they will still be responsible for repaying those specific debts. 11 U.S.C. § 523(a)(2)(A).