Adequate Assurance of Payment for Utilities Under Section 366

Adequate assurance of payment for utilities under Section 366 is the deposit or other security a bankruptcy debtor must give a utility company to keep service on after filing. In a Chapter 7 or Chapter 13 case you have 20 days from the order for relief to provide it; in a Chapter 11 case you have 30 days from the petition date, and the security has to be in a form the utility will accept. Miss the deadline without either delivering assurance or asking the court to intervene, and the utility can disconnect you.¹

The Initial Shield and Its Limits

When your case begins, Section 366(a) bars a utility from altering, refusing, or discontinuing service solely because you filed bankruptcy or because you owe money for service delivered before the filing date.¹ The word “solely” does the heavy lifting. The statute stops one specific kind of retaliation. It does not give you a permanent pass on paying.

The shield is also short-lived. Subsection (b) gives Chapter 7 and Chapter 13 debtors 20 days after the order for relief to provide adequate assurance; subsection (c) gives Chapter 11 debtors 30 days from the petition date. Treat the clock as running from day one.

Which Providers Count as Utilities

Section 366 does not define “utility.” The legislative history points to providers holding a “special position” with respect to the debtor, naming electric, gas, and telephone companies as examples. The unifying feature is that these providers tend to operate as monopolies or near-monopolies, so a customer who gets cut off cannot easily switch.²

Water and sewer service almost always qualifies. So do electricity and natural gas. Landline telephone service fits the legislative examples directly. Internet providers, cell carriers, and cable television companies sit in a grayer zone because their markets are more competitive, and courts have not agreed uniformly that they qualify. If you rely on one of these, raise the question with your attorney early rather than assuming the section covers it.

Assurance in Chapter 7 and Chapter 13

Subsection (b) controls consumer cases. Within 20 days of the order for relief you must furnish adequate assurance “in the form of a deposit or other security” for post-filing service.¹ The statute is deliberately open-ended about form. A cash deposit is the most common answer, but any arrangement the utility will accept can satisfy the requirement.

Amounts are supposed to be reasonable. Utilities typically look at recent billing history and ask for the equivalent of one to two months of service. If the demand feels excessive, either side can go to the court, which can order a “reasonable modification” after notice and a hearing.¹ Judges have broad discretion here and can weigh your payment history, current income, and the actual risk to the utility.

Stricter Rules in Chapter 11

Chapter 11 cases run under subsection (c), which is more prescriptive. You get 30 days from the petition date, but the assurance has to be “satisfactory to the utility.” If the utility rejects your offer, it can disconnect once the window closes.³

Subsection (c) also spells out the acceptable forms:

Cash deposit
Letter of credit
Certificate of deposit
Surety bond
Prepayment of utility consumption
Another form of security mutually agreed upon between the utility and the debtor or trustee

Administrative expense priority is explicitly off the list. That is the legal mechanism giving certain creditors a higher claim on estate assets, and Congress decided it did not provide a tangible enough guarantee for utilities. A Chapter 11 debtor has to put up real money or an equivalent financial instrument.³

What the Court Can and Cannot Weigh

You can still ask the court to modify a Chapter 11 utility’s demand, but the judge’s discretion is constrained. When evaluating adequacy, the court cannot consider that you had no deposit before filing, that you paid your bills on time before filing, or that an administrative expense priority would be available.³ A spotless pre-filing payment record does not count in your favor.

Pre-Petition Deposits May Be Absorbed

If you had a deposit on file before filing, subsection (c)(4) allows the utility to recover or set off against that deposit without a court order.³ The practical result is that the old deposit may disappear into the utility’s pre-petition claim, and you will still need fresh funds to satisfy the new assurance requirement.

Post-Petition Bills Are Still Yours

Delivering the deposit does not free you from paying monthly bills going forward. Section 366(a) only blocks disconnection tied to pre-filing debt or to the filing itself. If you fall behind on post-petition charges, the utility can pursue disconnection the same way it would with any other delinquent customer. Courts have held that the automatic stay does not prevent termination for post-petition nonpayment, because the shutoff is not based on the bankruptcy or old debt. The utility still has to follow its ordinary state-regulated termination process, including any required written notice and cure periods, but it does not need bankruptcy court permission to act.

People misread this often. The filing does not create a blanket shield against disconnection for the life of the case. The protection is narrow: no retaliation for filing, no punishment for old bills.

Delivering Assurance on Time

Start by pulling the last twelve months of statements for every utility account so you know your average monthly cost. Utilities frequently base their deposit requests on one to two months of average consumption, so knowing your numbers keeps the amount from surprising you.⁴ Have account numbers and each provider’s bankruptcy or legal department contact information ready before you reach out.

Deliver your proposal well before the deadline. Twenty days for Chapter 7 and 13 cases; 30 days for Chapter 11. Use a method that creates a delivery record, and address it to the legal or bankruptcy department rather than general customer service. Routing errors can burn days you do not have.

If the utility rejects your offer or demands more than you can afford, file a motion with the bankruptcy court before the deadline runs. The court can set a fair deposit and, while the dispute is pending, can prevent disconnection. Miss the deadline without either providing assurance or filing a motion, and the utility gains the right to terminate service without further court approval.¹

Recovering the Deposit After the Case

The Bankruptcy Code does not set a timeline for returning adequate assurance deposits after the case ends. In practice the deposit behaves like any other utility security deposit. Once the case closes, you convert to a regular customer relationship, and refund timing depends on the utility’s standard policies and applicable state regulations. If the utility applied your deposit to a post-petition balance, you may see only a partial refund or none. Deposits held before filing are treated separately, and in Chapter 11 cases may already have been absorbed under subsection (c)(4).

Debtors who received a discharge and kept post-petition payments current are in the best position to recover the full amount. Keep records of every payment made during the case; they give you leverage if the utility is slow to return the funds.

1
Office of the Law Revision Counsel. 11 U.S.C. 366 – Utility Service
2
Office of the Law Revision Counsel. 11 U.S. Code 366 – Utility Service
3
Office of the Law Revision Counsel. 11 U.S.C. 366 – Utility Service
4
United States Bankruptcy Court Western District of Wisconsin. In re Willie D. Price and Ruthie Lee Price