Utility Bill Debt and Your Bankruptcy Options
When you fall behind on bills
Utility bills are general payments. If you were to fall behind on a payment the water board couldn’t come by and repossess the water you used in yesterday’s shower. That’s why your utility bills are considered unsecured debt.
However, a power company, phone company or another service provider can take action against you. They may leverage fees or fines for late payments. And, if you fall far enough behind, they may send your bill to a collection agency.
If your bill is sent to a collection agency your credit score may be damaged. In addition, you can expect to start hearing from the agency with regularity. Expect collection letters and constant phone calls.
Click Here For Free 2 Minute Evaluation
Utility Bill Harassment and the Bankruptcy Automatic Stay
When you file bankruptcy the automatic stay should kick in and can provide quick protection against any type of collection effort. This includes:
- Phone calls
- Letters
- Lawsuits
- Wage garnishment
- Foreclosure
- Repossession
The automatic stay kicks in regardless of which type of bankruptcy you file. Because utility bills are considered unsecured debt they may be included in either a Chapter 7 or a Chapter 13 bankruptcy.
These are the two most common types of personal bankruptcy. Which one may be best for you will depend on several factors, including other types of debt involved and your personal financial goals.
Utility bills in Chapter 7
Chapter 7 bankruptcy is designed to address unsecured debt. In this case, your utility bills could be combined with other unsecured debts like credit card and medical bills. Chapter 7 works quickly to eliminate these debts, but first you must qualify by passing the means test. This is a measure of financial need based on your income and your debt.
If you are eligible to file Chapter 7, you will probably want to discuss your state bankruptcy exemptions with your bankruptcy lawyer to ensure your property is fully protected. Chapter 7 may be a good option for people with lots of unsecured debt and a low income.
Utility bills in Chapter 13
In a Chapter 13, your utility bill debt would be included with your other debts – including car loans and home mortgages. Your debt will be ordered and secured and may be reduced. Then, during a court-ordered repayment plan, you’ll make one monthly payment to satisfy your creditors. At the end of your repayment period, typically 3-5 years, all of your debts should be resolved.
Throughout your repayment timetable you should be protected by the bankruptcy automatic stay. As long as you make your payments you should be protected against harassment, lawsuits, wage garnishments, foreclosure and repossession.
This can be a good option for people who have steady income, and also want to protect lots of property, like a house and multiple cars.
Get answers about your bills and bankruptcy with a local lawyer
Bankruptcy can be a life-changing experience, but it can also be a complex process. That’s why many people turn to a bankruptcy lawyer for help.
A bankruptcy lawyer can look at your utility bills and other debts and help you decided on a type of bankruptcy that’s best for you.
To speak with a local bankruptcy lawyer, complete the free form on this page and we’ll connect you with a local bankruptcy attorney right away.