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Chicago Bankruptcy Question: How are past due utility bills treated in Chapter 13?

Chicago Bankruptcy Question of the Day: How are past due utility bills treated in Chapter 13?  The treatment of past due utility bills in a Chapter 13 bankruptcy filing is relatively straight-forward, but there are a few wrinkles.  There are three major issues that need to be addressed when dealing with utility bills: 1) Is the debt actually a utility bill, 2) Is the debt secured or unsecured, and 3) Has there been any action on the part of the debtor that could be problematic.

While it may seem like a common sense issue, determining whether or not a debt is indeed a utility in a Chapter 13 bankruptcy is not as easy as it first appears.  Clearly the electric, gas and water bills count as utilities.  Does the phone bill count?  How about a cell phone?  Cable?  Internet service?  Often times, this is a determination that is fact specific.  A home phone bill may be considered a utility if it is the only phone in the household.  Same with a cell phone.  Not so if you have both.  Cable may be considered a utility if you have children at home, but not if you live alone and predominantly have cable to watch sports.  Internet service may be a utility if you work from home, but not if you only use it to access your Facebook account.

If the debt is a utility, then it must be determined whether or not it is secured.  Most utilities are not secured and therefore are treated as general unsecured creditors.  The past due amount can be repaid at pennies on the dollar with the balance discharged at the completion of your Chapter 13 plan.  Some, such as water bills on a residence you own, are secured by a statutory lien on the property.  Past due balances in those cases must be paid in full through the plan.  In either case, the current bills from the date of filing forward must be maintained in order to keep the utility service.

Creditors deemed to be utilities are generally not allowed to deny you service due to a bankruptcy filing and inclusion of the past due amount in your Chapter 13 bankruptcy plan.  If they have already turned your service off, they are required to restore service upon case filing.  Utilities are permitted to ask for a reasonable deposit against future service and, if they ask, the filer is required to pay that deposit or service can be denied.  Utilities are also allowed to deny service if there has been any fraudulent behavior by the filer.  Usually this is a situation where the utility was terminated and the filer was able to restore service on their own, without the utilities permission or knowledge.  While it may not seem so, this is theft and, if it can be proven, the utility can deny future service.

If you have past due utility bills and are considering filing for Chapter 13 bankruptcy protection in the Chicago area, you want to have an experienced bankruptcy attorney representing you.  A good attorney will get notice out to the utility companies quickly and accurately, assist in negotiating reasonable deposits when requested and, if necessary, litigate with them to ensure that service is restored.  The bankruptcy lawyers at Ledford & Wu are happy to offer you a free consultation to discuss your Chapter 13 options and ensure that your utilities remain on.

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