How Bankruptcy Can Help You Get Ahead on Utility Bills This Winter

How Bankruptcy Can Help Y…

Winter in Michigan means cold temperatures and high heating costs. When freezing nights lead to high utility bills, consumers can suddenly find themselves facing collections efforts and threats of utility shut offs. Find out how a Chapter 7 bankruptcy can help discharge your utility debts while keeping the lights on and the heat running.

Chapter 7 Bankruptcy Petitions Put Utility Shut Offs on Hold

A shut-off notice from DTE, Consumers Energy, or another utility company is often the deciding factor pushing a family to file bankruptcy. When the weather is cold, you need to be sure the electricity and gas stays on, especially if you have children or vulnerable adults living in your home. During Michigan’s coldest months, a utility shut off can be physically dangerous and can create even bigger financial problems when pipes burst and family members get sick due to cold temperatures in the home.

A well-timed Chapter 7 bankruptcy petition can put utility shut-offs on hold and give your family time to make arrangements to keep the heat going, water flowing, and the lights on. Federal bankruptcy law prevents a utility company from changing, refusing, or disconnecting your service for 20 days once the bankruptcy petition is filed. They also cannot shut off your services just because you filed for bankruptcy or were late on your payments at the time the petition was filed. This law applies to all utility companies, including electricity, gas, water, and even some telephone services (not necessarily cell phones). However it doesn’t apply to other services like cable TV or Internet service providers (ISPs).

Timing is everything in these cases. Under Michigan law, utility companies must give consumers written notice of a utility shut off at least 10 days prior to disconnection. The day before service is suspended, the company must make at least 2 attempts to contact the customer by telephone and explain what to do to avoid disconnection. Ten days isn’t a lot of time to get your bankruptcy documents together. If you are hoping bankruptcy can help you avoid a utility shut off, you and your bankruptcy attorney may need to file an emergency bankruptcy filing now and submit the remaining documents over the next 14 days.

What Happens to Past-Due Utility Bills in a Chapter 7 Bankruptcy

Once your bankruptcy petition is filed, you don’t need to worry about your past-due utility bills. In addition to the 20-day hold on utility shut offs, every bankruptcy petition triggers an automatic stay on all collections for debts included in the bankruptcy. That means the utility company’s debt collectors must stop calling, sending you notices, or trying to collect your past-due utility bills while the bankruptcy is pending.

In the meantime, your bankruptcy attorney will help you list all the debts you owe in a bankruptcy schedule, including anything you owe to the utility companies. Then you, your attorney, and the bankruptcy trustee will work together to identify, sell, and distribute your non-exempt assets among all your creditors and discharge anything that cannot be paid. At the end of the bankruptcy, anything that was owed the day the petition was filed will be wiped away and you will be able to start fresh.

What Consumers Need to Do to Keep the Utilities On After Filing for Bankruptcy

Unlike the absolute stay on collections efforts, the hold on utility shut offs doesn’t last forever. You have 20 days after the bankruptcy petition is filed to contact your utility companies and provide “adequate assurance” that you will be able to pay future utility bills. Adequate assurance usually takes the form of a:

  • Letter of credit
  • Cash deposit
  • Certificate of deposit
  • Surety bond
  • Prepayment

Most utility companies demand a deposit to avoid disconnection after the 20 day window. However, sometimes the amount they request isn’t reasonable. If you get a deposit demand you can’t afford, your attorney can ask the bankruptcy judge to order the utility company to accept a different form of payment assurance or lower the deposit amount.

Once you are sure the utilities will stay on, it is up to you to keep up with the new utility bills as they come due. A Chapter 7 bankruptcy only applies to debts that exist on the day the petition is filed. Anything that comes due after that date will be your responsibility going forward. If you fall behind again, you could face a new round of utility shut-off notices and this time you won’t be able to use a bankruptcy petition to buy you more time to pay.

Other Assistance Available to Michigan Residents for Utility Bills

Whether you decide to file a Chapter 7 bankruptcy or not, you may be eligible for some non-bankruptcy options to help manage your monthly utility bills and avoid utility shut-offs. Michigan state law limits utility companies’ power to disconnect services of senior citizens, low-income families, military customers, and some people facing medical emergencies. Many utility companies also provide payment plans and other programs to help smooth out the seasonal ups and downs of energy costs. However, each of these programs and state restrictions come with their own eligibility requirements and application processes. Talk to your bankruptcy attorney to see if you qualify for shut-off restrictions or a payment program in place of, or in addition to your Chapter 7 bankruptcy petition. By being smart and proactive about your utility costs, you can keep your family comfortable, manage your monthly expenses, and get a fresh start without the burden of past-due utility bills.

At John A. Steinberger & Associates, P.C., we know how winter weather can affect the family budget. We will work with you to make the most of your Chapter 7 bankruptcy, avoiding shut-offs, discharging past-due utility bills, and negotiating with utility companies to accept adequate assurances of future payment. We are a full-service bankruptcy law firm in Southeast MI. We serve debtors and families in Southfield, throughout Metro Detroit, and in the surrounding communities. Call us toll-free at (866) 690-2140 or contact us online to schedule a free initial consultation.