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What happens to your utility bills when you file Chapter 11?

On Behalf of | Jun 23, 2022 | Chapter 11 |

It’s no secret that energy costs are skyrocketing. Your business is in a slump, but the balance on the utility bills just keeps getting higher.

As it gets clearer that you’re probably not going to be able to keep your business going unless you file for a Chapter 11 bankruptcy and reorganization, but you’re worried that you’ll never be able to come up with the money for those past-due utility bills. If your utilities get shut off, your business will never recover.

Fortunately, you may have no reason to worry. Following are some things you should know.

An automatic stay goes into effect as soon as you file your bankruptcy

Once your bankruptcy petition is filed with the court, something known as an “automatic stay” goes into effect. In essence, this prohibits any collection efforts against your business. The utility companies will be notified, and they can no longer turn off your electric, gas or water over the past-due amounts.

You still need to keep paying the current charges

Federal law requires the utility companies to treat you like a brand new customer. However, that can include a requirement to provide assurance of payment through a security deposit, bond or prepayment.

If you don’t provide the requested surety within 30 days of filing Chapter 11, the utility company can then terminate services. They can also shut off your utilities in the future if you fail to make your regular payments.

Because a business bankruptcy can be such a complex undertaking, make sure you have solid legal guidance from the start to answer all your questions.