Keeping the Lights On: Utilities and Bankruptcy

If you're behind on your electric, gas, water, or phone bill and you're thinking about bankruptcy, here's the direct answer: a utility company cannot shut off your service, refuse to connect new service, or treat you worse than any other customer just because you filed bankruptcy or because you owe them money from before you filed. That protection is federal law. But it comes with a catch that trips people up constantly — the utility is allowed to demand a deposit or other "adequate assurance" that you'll pay for service going forward, and it has to give you at least 20 days' notice to provide it. Miss that window, and the utility can legally disconnect you.

This page explains how that protection works, how your old utility bill fits into the bankruptcy discharge, and exactly what to do when a deposit demand letter shows up in your mailbox.

The federal protection: 11 U.S.C. § 366

The rule lives in the Bankruptcy Code itself, at 11 U.S.C. § 366 ("Utility service"). It applies whether you file Chapter 7 or Chapter 13, and it covers the kinds of services people actually can't live without — electric, gas, water, sewer, telephone, and similar utilities, whether the provider is a private company or a municipal/public utility.

Section 366 does two things at once:

• It bars retaliation. A utility "may not alter, refuse, or discontinue service to, or discriminate against" you solely because you filed bankruptcy, or solely because you owe the utility money from before you filed that hasn't been paid (or that later gets wiped out in your discharge). They can't punish you for exercising your right to file, and they can't punish you for a debt the bankruptcy court has discharged.
• It lets the utility ask for security going forward. Within roughly 20 days after your case is filed, the utility can require you to provide "adequate assurance of payment" — usually a cash deposit — for the service you'll use from that point on. If you don't provide it within that window, the utility is legally free to cut you off.

In plain terms: bankruptcy protects you from being punished for the past. It does not require the utility to serve you for free going forward, and the law gives them a fast, specific way to protect themselves — a deposit — instead of just shutting you off the day you file.

What counts as "adequate assurance"

For an individual consumer, adequate assurance almost always means a cash deposit sized to roughly one to two months of typical usage, though the exact form and amount can vary. The Code also allows other arrangements — a letter of credit, a certificate of deposit, a surety bond, prepayment of expected usage, or another form the utility and the debtor agree to. In a Chapter 7 or Chapter 13 case, if the utility's deposit demand seems excessive given your situation, you (or your attorney) can ask the bankruptcy court — after notice and a hearing — to order a reasonable modification of the amount, so the deposit is no larger than what is genuinely needed to assure payment for service going forward. That is spelled out in § 366(b). (One stricter rule — that a court may not weigh your prior payment history at all — applies only in Chapter 11 business reorganizations under § 366(c), not in an ordinary consumer Chapter 7 or Chapter 13 case, so don't assume it applies to you.)

What happens to the old utility bill

A past-due utility bill for service you already used is ordinary unsecured debt — legally, in the same category as a credit card balance or a medical bill. It is not a debt that survives bankruptcy by default. In a Chapter 7 case, the discharged balance is wiped out along with your other qualifying unsecured debts. In a Chapter 13 case, it's grouped with your other unsecured claims and paid according to your repayment plan, with any remaining balance discharged when the plan is complete. For a broader look at which categories of debt bankruptcy can and can't erase, see what debts bankruptcy can discharge.

What is not discharged, and never was covered by the bankruptcy filing, is any utility usage from after you filed. Those are new charges for a new stretch of service, and you're expected to pay them like any other current bill — that's exactly what the deposit is there to secure.

What to do when a deposit demand arrives

1. Notify the utility that you filed, if you haven't already. Give them your case number and the name of the bankruptcy court. Utilities generally learn about a filing from the notice the court sends to your listed creditors, but there's no harm in confirming it directly, especially if you're worried about a disconnection notice crossing paths with your filing.
2. Read the deposit letter carefully and note the date. Calendar the deadline the moment it arrives — don't wait until you have time to "deal with it later."
3. Pay or arrange the deposit within the window. If you can afford the amount requested, paying it promptly is usually the simplest path to keeping service uninterrupted.
4. If the amount seems unreasonable, ask your bankruptcy attorney about challenging it. You or your attorney can ask the bankruptcy court, after notice and a hearing, to order a reasonable modification of the deposit instead of simply paying whatever the utility asks. This is a real option, not just a formality, but it takes filing something with the court — it isn't automatic.
5. Keep paying your post-filing utility charges on time. Adequate assurance protects the utility going forward; it doesn't replace your ongoing obligation to pay for service you use after your case is filed.
6. If you're disconnected despite meeting the deadline, or before the 20 days have run, contact your bankruptcy attorney immediately. A utility that cuts you off in violation of Section 366, or that ignores the automatic stay that starts the moment you file, may be violating federal law. For how the broader stay works, see the automatic stay and how bankruptcy stops collections.

A few things this protection does not do

• It doesn't force a utility to restore service that was already shut off before you filed for nonpayment. Getting reconnected after a pre-filing shutoff is usually governed by your state's utility regulations and the provider's own reconnection policies, not Section 366.
• It doesn't cover every account you might think of as a "utility." Whether a particular service — cable, internet, or certain municipal charges — falls under Section 366 can depend on how it's classified locally; the safest move is to ask your attorney if you're unsure about a specific provider.
• It doesn't erase your obligation to pay for service you use going forward. Bankruptcy discharges past debt, not future usage.

Beware of scams while you're sorting this out

People juggling overdue utility bills and a looming bankruptcy filing are frequent targets for for-profit debt-settlement companies that promise to "negotiate away" your utility and other debts for a large upfront fee — often while your bills keep piling up and the fee itself eats into money you needed for a deposit or an attorney. Be equally cautious of non-attorney "petition preparers" who offer to fill out your bankruptcy paperwork for a flat fee; they are legally barred from giving you legal advice, and mistakes on a bankruptcy petition can jeopardize your case. If cost is the barrier, look into legal aid, a law school bankruptcy clinic, your local bankruptcy court's self-help resources, or a credit counseling agency approved by the U.S. Trustee Program, which maintains an official list at justice.gov/ust.

Where to check current details

The text of the statute is available at govinfo.gov (11 U.S.C. § 366). General guidance on how bankruptcy cases proceed is available from the federal courts at uscourts.gov. Because the specifics of a deposit dispute depend on your case and your utility's practices, this is the kind of situation where a short conversation with a bankruptcy attorney — many offer free or low-cost initial consultations — can save real money and stress.

This article is general legal information, not legal advice, and reading it does not create an attorney-client relationship. For guidance on your specific situation, talk to a licensed bankruptcy attorney.