Does Bankruptcy Take Care of Past-Due Utility Bills?

Yes and no. Past-due utility bills are unsecured debts. So, they are dischargeable in bankruptcy. “Discharge” basically means the judge eliminates the legal obligation to repay the debt. In other words, the debt disappears, but not the collateral consequences of that debt. Utility companies may still cut off service, deny service, and take other adverse action until the obligation is paid or otherwise satisfied.

Generally, a Dyer bankruptcy lawyer negotiates with utility companies. Utility companies typically accept partial payments and forego any adverse actions. Attorneys usually negotiate with credit card companies, taxing authorities, and other unsecured debtors who place liens or take other adverse actions before the debtor files for bankruptcy. On a related note, after the debtor files for bankruptcy, utility companies can only shut off utility services in limited situations. Generally, utility companies cannot terminate service without giving proper notice to debtors.

Discharge in Chapter 7

Chapter 7 discharges unsecured debts in as little as nine months. So, these debtors quickly get a fresh financial start.

Most people qualify for Chapter 7, even under the means test. Families presumptively qualify if their annual incomes are below $95,000 (for a family of four) as of November 1, 2022. This amount changes about every six months.

If your annual income is slightly over the cutoff, a Dyer bankruptcy attorney helps you qualify based on your monthly income/expense ratio. Some parts of the Hoosier State are much more expensive in terms of the cost of living than others.

If your annual income is substantially above the cutoff, quite frankly, you probably do not need to file Chapter 7. Other options, such as Chapter 13 and non-bankruptcy debt negotiation, are usually available.

Other dischargeable unsecured debts include credit cards and medical bills. Most people file bankruptcy because sudden illness, temporary unemployment, or another event that was beyond their control caused them to run up high credit card or medical bill totals.

Repayment in Chapter 13

Chapter 13 debtors have up to five years to catch up on delinquent secured debts and satisfy certain unsecured debts. Secured debts include obligations like home mortgages and automobile loans. 

Technically, past-due utility bills are not priority unsecured debts, like student loans and back taxes. However, the trustee is usually willing to include these obligations in a Chapter 13 debt consolidation plan. 

Bankruptcy’s generous protections do not last forever. So, attorneys unlock advanced bankruptcy options that free up additional money every month, so high utility bills are no longer a problem.

A fair market value cram-down is a good example. Assume Jill owes $15,000 on a vehicle that’s only worth $10,000. In many cases, if Jill makes extra payments during the protected repayment period and pays off the $10k, the bank may have to tear up the rest of the loan. Jill then owns the vehicle free and clear.

Connect With a Thorough Lake County Attorney

If you are struggling with your finances, bankruptcy could be a way forward. For a free consultation with an experienced bankruptcy attorney in Dyer, contact Whitten & Whitten. After-hours, virtual, and home visits are available.