Can The Automatic Stay Stop Your Utilities From Being Shut Off?

How the Automatic Stay Affects Utility Shut-Offs

So, can the automatic stay stop your utilities from being shut off? In most cases, yes—but only for a short time.

Under Section 366 of the Bankruptcy Code, a utility company cannot shut off services solely due to past due utility bills once you’ve filed for bankruptcy. This includes essential services such as electricity, water, gas, and certain telecommunications.

This protection, however, isn’t forever. You get 30 days of coverage. After that, the utility provider has the legal right to resume termination unless you provide what’s called “adequate assurance” that you’ll pay your future bills.

Understanding Adequate Assurance

“Adequate assurance” means a good-faith payment or deposit that convinces the utility company you’ll meet your utility payments going forward. It can take the form of:

• A security deposit
• A letter of credit
• A prepayment
• Or another arrangement approved by the bankruptcy court

If you don’t offer this assurance within the 30-day window, the utility provider can go right back to utility termination, regardless of your bankruptcy status. So, while the automatic stay gives you immediate relief, it’s not a permanent solution to your utility bills.

What Types of Debts Does the Automatic Stay Cover?

The automatic stay primarily halts actions related to unsecured debts, such as medical bills, credit card balances, and utility charges. It does not block collection efforts tied to certain obligations, such as child support. So, if you owe back payments on child support, the stay won’t help there. The same applies to criminal fines and certain tax debts.

If utility bills fall into the unsecured debt category, they fall under the stay. This means utility shut-offs get paused the moment your bankruptcy petition is filed. But again, this is a temporary pause, not a cancellation of what you owe.

How Bankruptcy Type Impacts Your Utilities

When it comes to utility services, both Chapter 7 bankruptcy and Chapter 13 offer the automatic stay. But how they handle your debts afterward differs.

• In Chapter 7 bankruptcy, your non-exempt assets get liquidated to pay off your creditors. You might not keep your utility services long-term unless you keep up with current utility payments and offer adequate assurance.
• In Chapter 13 bankruptcy, you enter a repayment plan that spans 3 to 5 years. Your past due utility bills can be included in the plan, allowing you to catch up gradually. This setup is often more effective in preventing utility termination in the long run.

Either way, filing for bankruptcy can stop the immediate threat of a utility shut-off, but how you proceed afterward depends on your budget, your debts, and your ability to make future payments.