With blazing hot summers and cold winter nights, having working utilities in Arizona will keep you comfortable and safe. But what happens when those crucial bills pile up, along with everything else, and the weight of debt threatens to cut off your power or shut off your heat? If you are behind on your bills and struggling financially, filing for bankruptcy can give you a fresh financial start. But, you might be wondering, will bankruptcy clear utility bills?
In this blog, the Arizona bankruptcy attorney at Lerner and Rowe Law Group explains what happens to utility bills in the bankruptcy filing process.
What Happens to My Past-Due Bills During Bankruptcy?
This is one of the biggest questions those filing bankruptcy in Arizona face. Like credit card debt and medical bills, utility bills are considered unsecured debts in Arizona. Secured debts, like mortgages, auto loans, and home equity lines, are tied to specific assets, which act as collateral. If you default on secured loans, the lender can repossess that collateral to recoup their losses.
Unsecured debts aren’t tied to collateral and bankruptcy can clear utility bills under certain chapters. In the case of utility bills and other unsecured debts, the lender can’t take your belongings, however, missed payments can damage your credit score and lead to other collection actions.
Can I Still Have Utility Services During Bankruptcy?
Filing for bankruptcy triggers an automatic stay which prohibits creditors, including utility companies, from collection activities like service termination or lawsuits. Federal bankruptcy law protects against utility disconnection for up to 20 days.
Federal law also prevents utility companies from discriminating against debtors based on their bankruptcy status. This means they cannot offer different terms or conditions to debtors compared to non-bankrupt customers. While you can have utilities when filing bankruptcy, you must provide an “adequate assurance of payment” for services used after filing for bankruptcy. This can be a deposit, security, or timely payments. If assurance is not provided within 20 days after the bankruptcy filing, the utility may discontinue service.
What Utility Bills Will Bankruptcy Clear?
Various utilities debts can be included in your Arizona bankruptcy filing, such as:
- Electricity
- Water
- Gas
- Telecommunications, like phone, internet, and cable TV services
- Trash and Sewer
- Heating and Cooling
Will Chapter 7 Bankruptcy Clear Utility Bills?
Chapter 7 bankruptcy can clear utility bills in Arizona, but there are some important things to keep in mind:
- Filing for Chapter 7 can eliminate your legal obligation to pay the discharged debt, but it doesn’t erase the actual usage of the utilities. You’ll still need to catch up on current and future bills to maintain service.
- Within 20 days of filing, you might need to demonstrate your ability to pay future bills, or “adequate assurance.”
- Failure to provide this assurance could lead to service disconnection, even if your past debts are ultimately discharged.
- Know that some utility companies may choose not to restore service if you have a discharged debt on your account.
Will Chapter 13 Bankruptcy Clear Utility Bills?
Chapter 13 bankruptcy in Arizona will not clear your utility bills in the same way Chapter 7 can. If you opt to file Chapter 13 bankruptcy over Chapter 7, there are some important things to know:
- Unlike Chapter 7, your past-due utility bills will be lumped into your unsecured debt in Chapter 13 and included in your repayment plan. This means you won’t be immediately free of those debts.
- You’ll likely only pay a portion of your past-due utility bills through your plan, depending on your income and other financial obligations.
- The remaining balance will be discharged at the end of your plan, typically 3-5 years.
Contact an Arizona Bankruptcy Attorney
Filing for bankruptcy is a stressful process. Wondering whether bankruptcy will clear utility bills is a concern for many. The type of bankruptcy you choose to file will determine what will clear utility bills. Our Arizona bankruptcy attorney understands each situation is unique and is prepared to help you find the best solution to your fresh, financial start.
To get started on your bankrupting filing today, schedule a free consultation with one of our bankruptcy attorneys. We offer flexible, affordable payment plans for our clients.
To schedule, call us at 602-667-7777. You can also reach us by LiveChat, or request your free case review by completing this secure online form.