Past-due utility bills can be included in a Chapter 7 bankruptcy and wiped out along with your other unsecured debts.1United States Courts. Discharge in Bankruptcy – Bankruptcy Basics The harder question for most people is whether the lights stay on while the case runs. Federal law says they do, but only if you meet a 20-day deadline that trips up a lot of filers.
Which Utility Debts Chapter 7 Wipes Out
Utility providers have no collateral. You already used the electricity or water, and nothing can be repossessed. That makes the balance a general unsecured claim, which a Chapter 7 discharge eliminates in full.1United States Courts. Discharge in Bankruptcy – Bankruptcy Basics
The cutoff is your filing date. Charges for service used before you file can be discharged. Charges for service you use afterward are yours to pay and have nothing to do with the bankruptcy. Electricity, gas, water and sewer, and landline telephone all qualify. Whether internet and cell phone accounts count as “utilities” under the bankruptcy code varies by jurisdiction, so raise those with your attorney if the balances are large.
List every provider you owe on your bankruptcy schedules. That is how the court notifies them, and that notice is what triggers the protections below. A provider you forget to list may not be bound by the discharge the same way, so leave none off.
Can a Utility Shut Off Service After You File?
Two separate federal protections kick in the moment your petition is filed.
The Automatic Stay
Filing triggers an automatic stay that stops nearly all collection activity: calls, letters, lawsuits, garnishments.2Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay A utility company is a creditor like any other and has to stand down on the old balance while your case is open.
The Utility-Specific Rule
On top of the stay, a separate statute aimed squarely at utilities bars a provider from altering, refusing, or discontinuing service solely because you filed bankruptcy or because you owe for pre-filing service.3Office of the Law Revision Counsel. 11 USC 366 – Utility Service If a shutoff notice over old debt is sitting on your counter, this is the provision that stops it.
The word “refusing” has led many courts to require reconnection when service was cut off shortly before filing. The statute does not say “reconnect” in so many words, so results depend on the court and the facts, but if your power went out days before you filed, your attorney has a workable argument to get it back on. Move fast.
These rules apply to municipal and other government-owned utilities too. Federal bankruptcy law waives sovereign immunity for the stay and the utility service provisions, so a city water department cannot hide behind its government status.4Office of the Law Revision Counsel. 11 US Code 106 – Waiver of Sovereign Immunity
The 20-Day Deposit Deadline
The shutoff protection is not unconditional. Within 20 days of your filing date, you must give the utility adequate assurance that you will pay for future service. Miss that window and the provider can disconnect you, stay or no stay.3Office of the Law Revision Counsel. 11 USC 366 – Utility Service
In Chapter 7, adequate assurance almost always means a cash security deposit. The statute itself just says “a deposit or other security” and sets no dollar amount. Providers typically base the request on your recent usage. A letter of credit or prepayment can also qualify, though cash is the norm.
If the demand feels inflated, you can ask the bankruptcy court to set a reasonable figure. Judges have express authority to modify the amount and routinely do when a provider pushes for more than future service really warrants.3Office of the Law Revision Counsel. 11 USC 366 – Utility Service
The clock runs from your filing date, not from the day you tell the utility. Plan for the deposit before you file. Rounding up several hundred dollars on 20 days’ notice while you are already broke is exactly how an otherwise clean case falls apart.
Utility Debts That Survive Bankruptcy
A few kinds of utility debt do not get discharged. The utility has to raise the issue by filing a complaint with the bankruptcy court; ordinary unpaid bills from honest usage are not at risk.5Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge Two situations matter:
- Debt run up through fraud, such as opening an account under a false name or through identity theft.
- Debt tied to meter tampering or theft of service, which the law treats as willful damage to the utility’s property.
If you simply fell behind on the electric bill, neither applies.
After You File: Bills, Deposits, and Taxes
Post-filing charges sit entirely outside the bankruptcy. No court protection reaches them. Fall behind on bills generated after your filing date and the utility can tack on late fees and shut you off through its usual process, exactly as if you had never filed.
A typical Chapter 7 runs about three to four months from filing to discharge. Pay every utility bill on time during that stretch and after. A clean payment history also helps you get the adequate-assurance deposit back. Many providers refund it after roughly 12 months of on-time payments, though policies differ.
One tax note. Canceled debt is normally taxable income, but debt wiped out in bankruptcy is excluded from gross income under federal tax law.6Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness If a utility sends you a Form 1099-C for the discharged balance, you (or your preparer) need to file IRS Form 982 with that year’s return to claim the bankruptcy exclusion; ignore the 1099-C and the IRS may bill you for tax on the full amount.7Internal Revenue Service. Publication 4681 – Canceled Debts, Foreclosures, Repossessions, and Abandonments