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Terminating Utility Service for Failure to Pay Post-Petition Charges Not a Violation of the Stay

One factor that contributes to people filing for relief under the bankruptcy code is past due utility bills.  Upon the filing of a case, the utility company must discontinue its collection attempts on the old debt and continue to provide the Debtor with services; however, this protection is only applicable to the pre-petition portion of the Debtor’s bill.  All charges incurred since the date of filing must be paid if the Debtor does not want his/her service to be discontinued as was the case in In re Weisel (428 BR 185 – Dist. Court, WD Pennsylvania, 2010).

In the Weisel case, the Debtors included a pre-petition debt from Dominion Gas in the amount of $1,203.40.  As is customary with utility providers, upon the filing of the case, Dominion closed the Debtors’ pre-petition account which included all utility charges prior to the date of filing.  Dominion then opened a post-petition account for the Debtors with an account balance of $0. In conjunction with opening the new account, Dominion requested a post-petition deposit of $217.00.  After paying $215.00 towards the requested deposit, Dominion continued to provide service to the Debtors.  Over the next year and a half, Debtors made sporadic payments to Dominion and accumulated a post-petition delinquency of $1,157.09.  After providing Debtors proper notice pursuant to state law, Dominion terminated gas utility service to the Debtors’ residence.  Debtors then filed a motion against Dominion alleging that Dominion violated the Bankruptcy Code by terminating their gas service without obtaining relief from the automatic stay.  The Debtors were unsuccessful.

Section 366(a) of the Bankruptcy Code provides the general rule that a utility may not alter, refuse, or discontinue service to a debtor “solely on the basis of the commencement of a case under this title or that a debt owed by the debtor to such utility for service rendered before the order for relief was not paid when due.”  However, Several courts have permitted termination for failure to make post-petition payments concluding that the use of the word “solely” in § 366(a) implied that a utility may refuse to furnish services on grounds other than the commencement of the bankruptcy case or because of outstanding pre-petition debts.  Specifically, in Begley v. Philadelphia Elect. Co., the court concluded that:

“The restriction on termination in section 366(a) bars only those terminations which issue “solely on the basis” that a debt incurred prior to the bankruptcy order, was not paid when due. Thus, by implication, termination for failure to pay post-petition bills would not seem to be barred by section 366(a) … This reflects an understanding that the utility will be allowed to commence termination procedures once a post-petition payment is missed, despite the prior security or “assurance” deposit.”

Begley v. Philadelphia Elect. Co., 760 F.2d at 49-51.

In conclusion, although bankruptcy can be a useful tool when it comes to past due utility bills, if you wish to continue your service, it is imperative that you make timely payments on any post-petition utility bills.  Therefore, when you are working with your bankruptcy attorney on the income and expense portion of your bankruptcy petition, make sure that there are enough funds to cover your future utilities.  Otherwise, your utility company will exercise its legal right to terminate your service.  For more information, contact the Law Office of Suzanne Szymoniak.

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Utilities in Bankruptcy

Often times, individuals contemplating bankruptcy may have fallen behind on their gas, electric or other utility payments.  One of the benefits of bankruptcy is that filing can keep the company from discontinuing your service; however, there is one drawback that people do not immediately consider.  Upon the filing of your case, your utility company must close your current account with them as they are no longer permitted to collect on that account due to the bankruptcy stay.  They must then open you a new account in order to continue providing you with service.  The good news is that any balance owed on the old account will be discharged with the rest of your unsecured debt.  The bad news, however, is that in order for the utility company to open you the new account, they will require that you pay a security deposit.  This is often times an added expense that individuals do not account for when they are preparing to file for bankruptcy.  One company that consistently uses this method of closing your old account, opening a new one, and charging a security deposit is Duquesne Light, but don’t be surprised if you receive similar notices from your other utility companies upon the filing of your case.  In short, when you are trying to determine the cost of your bankruptcy case, don’t forget to account for some additional expenses caused by the need to pay these security deposits to maintain your utility services.  For more information on costs associated with bankruptcy, contact the Law Office of Suzanne Szymoniak today.

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