Removing Bankruptcy's Automatic Stay: Utilities and Rent

The automatic stay is an injunction that goes into effect beginning of a bankruptcy case. It prohibits a creditor from taking certain actions to collect debt. Those actions include attempts to cut off utilities or to evict a renter. For a utility customer or a renter, the protection of the automatic stay is not absolute and will not prevent the creditor from taking action eventually. If you find yourself in this position, you must act quickly to protect your status.

 

Read more about what the automatic stay does at The Automatic Stay: How It Protects You When You File Bankruptcy.

Action on Unpaid Utilities

Filing bankruptcy will prevent a utility company from shutting off your power, gas, water, sewage and garbage pickup. Many bankruptcy courts also consider phone, cable, and ​internet to be utilities. Utility companies have certain rights in bankruptcy that are not available to other creditors. Because, presumably, you will want to continue receiving these utility services, the utility creditor has the right to require that you provide "adequate assurance" that you will pay for future services. Without adequate assurance, the utility may have the right to cut you off 20 days after you file your bankruptcy case. If you let the 20 days pass without providing adequate assurance, some courts take the position that the utility has to file a ​motion to lift the stay before it can cut off services.

Other courts say that a utility can cut off its bankrupt customers without getting permission first. 

Adequate assurance is designed to protect the utility from losing money on you after you file the bankruptcy case. Any amounts you owe the utility for past services when you file your bankruptcy are likely dischargeable in the bankruptcy.

Adequate assurance can vary by utility or situation, but it may include a cash deposit, prepayment, a letter of credit, a surety bond, or another guarantee of payment. 

When You File Bankruptcy After the Utility Cuts Service

What if the bankruptcy is filed after the utility cuts off service? Does the utility company have to restore the service? Probably. The Bankruptcy Code prohibits a utility from refusing service if the only reason is that you owe the utility an unpaid debt that has been or will be discharged in a bankruptcy case. A utility cannot discriminate against a potential customer solely because the customer filed a bankruptcy case in the past. 

The utility cannot charge you a reconnection fee or require that you provide another deposit unless it requires the same from non-bankruptcy customers who lost service after non-payment.  

Eviction From a Rental Unit

If you get behind in your rent payments and refuse to vacate your house or apartment, the landlord can usually file a simple suit for eviction in small claims court and obtain an order that allows him to enter your rental unit and remove your property. If you file a bankruptcy case, it may complicate the issue, but that will generally not stop an eviction proceeding for long.

 

     You File Bankruptcy Before the Eviction Judgment 

If you file your bankruptcy before the landlord is able to get the judgment from the state court, the landlord can file a motion with the bankruptcy court for relief from stay to proceed with the eviction action. Unless you have a good reason why you should not be evicted, the court will probably grant the landlord's motion.

If the landlord is trying to evict you due to illegal drug use or because you have otherwise endangered the property, the landlord does not have to file a motion with the court, although he will have to file a certification explaining the reason for the eviction. If you fail to object to the certification within 15 days, the landlord can continue with the eviction action. If you file an objection, the bankruptcy court has to hold a hearing within 10 days to decide whether to allow the eviction.

 

     You File Bankruptcy After the Eviction Judgment

If you file a bankruptcy case after the landlord has gotten a judgment from the state court, a bankruptcy will only help prevent eviction if your state allows you to cure your rental default by bringing your account current. You will have to file a special certification with the court and deposit with the court enough cash to cover the amount of the rent that will become due in the next 30 days. You will then have 30 days to pay back all the back rent you owe. 

You can learn more about removing the automatic stay in particular circumstances when you visit the following articles:

The Automatic Stay: How It Protects You When You File Bankruptcy

Removing Bankruptcy's Automatic Stay: Introduction

Removing Bankruptcy's Automatic Stay: Lawsuits and Insurance Claims

Removing Bankruptcy's Automatic Stay: Past Due Car and House Payments 

Your Rights When a Creditor Violates the Automatic Stay