Maryland Bankruptcy Attorney Urges Vigilance When Dealing With Utilities in Bankruptcy
When filing for Chapter 7 bankruptcy in Maryland, many people want to include past-due utility bills in the debts to be discharged. However, that is not the end of the equation, and debtors need to consider how to negotiate a good deposit for continued service after the bankruptcy filing.
First of all, we all must use some common sense: As a Maryland bankruptcy attorney, I do not recommend bankruptcy as a way to prevent shut-off of your electricity or gas if that is your only debt issue, unless it is overwhelming in size. Smaller debts should be negotiated with the utility company if there are no other debts that would cause you to consider bankruptcy for other reasons.
How can a utility bill become overwhelming?
If you have had a Winter season of service without paying (when the Public Service Commission prohibits turn off of service), thousands of dollars can accrue to present a rude “Spring awakening” when your service is disconnected following the conclusion of the “no turn off” period. Or, you may have had a roommate, subtenant or friend who received the bill and did not pay it to your detriment, when you were the account statement customer of record. Absent proper representation in a bankruptcy case, it is an endless maze of questions when dealing with the utility company to have power restored with many confusing choices.
Before I launch into the important rules of how to maintain utility services in a bankruptcy proceeding, remember that it is best to consult with an experienced bankruptcy lawyer about your specific circumstances before filing a Maryland bankruptcy petition.
Utility Companies Require Additional Deposit Within 20 Days After Filing An Individual Maryland Bankruptcy Petition; However, Negotiations Are Permitted And Indeed Required.
In 2010, a condominium housing 200 plus financially disadvantaged individuals was filed by my Maryland bankruptcy law firm in Chapter 11 reorganization. There was an immediate battle with three utility companies (ie; power, gas and water) because hundreds of thousands of dollars had accrued in back utility bills. The utility company said that the condominium residents as a single metered debtor had to pay whatever the utility required for a deposit, which was thousands and thousands of dollars just days after the bankruptcy petition date. The debtor argued, through my Maryland bankruptcy firm, that the parties had to negotiate and the utility company could not just set the rules. The Bankruptcy Court agreed with my argument, and the now famous “Bedfordtown Utility Doctrine” of Maryland was born in April, 2010. You see, utility companies have a right to receive adequate assurance in the form of a deposit or other security to avoid losing more money after the bankruptcy when they have already lost money before the bankruptcy was filed. However, utility companies can no longer dictate terms to debtors as to what they have to pay as a deposit in the first 20 days, but rather the parties have to negotiate a good faith solution. My Maryland bankruptcy firm even received a sanctions award for money damages against one of the utilities for violating federal bankruptcy laws, which covered more than $1,000.00 in attorneys’ fees on that issue alone which as a result the debtor did not have to pay.
There are two rules to be learned from this “Bedfordtown Utility Doctrine” which I helped to establish as the governing law over all future Maryland bankruptcy cases. First, you as the debtor have to make a deposit offer in 20 days from the filing of the bankruptcy case (30 days in Chapter 11 “reorganization” cases). As noted earlier, this deposit or other security is called “adequate assurance” of payment, and it is intended to make sure the utility does not lose money post-bankruptcy for new services. This is very important because the utility only has to keep your power on for the first 20 days and can then terminate it if you have not offered a deposit. Secondly, although a “benchmark” rule in many cases is a two month deposit based on average usage, the parties can negotiate. If they can’t agree, your Maryland bankruptcy lawyer can take it for you to the Bankruptcy Court and let the Judge decide it. Finally, your right to receive utility service post-bankruptcy has nothing to do with whatever your bill was for services provided BEFORE the bankruptcy case was filed. You do have to pay your post-bankruptcy utility bills on time. Even if you are current pre-bankruptcy, the utility may demand a deposit, but it is your RESPONSIBILITY to offer some form of deposit or other security within 20 days, or you are at risk of losing service. That’s the law.
How much is the deposit?
It varies from company to company, but as noted above, you can expect to pay up to two times your average monthly bill from the company. Again, you can negotiate this, and you can even negotiate the timing of the payment with a competent Maryland bankruptcy attorney. It’s best to contact your utility providers prior to filing for bankruptcy so you know exactly what to expect, or to consult your bankruptcy lawyer to see if exceptions can apply in your case.
What happens to my deposit?
As long as you pay all your post-petition bills on time for a certain number of months, usually utility companies return the deposit in full or credit it to your account. The amount of time required varies depending on your state laws (ie; Code of Maryland Regulations) and you should contact someone at the utility company or your local public service commission to get details. If you fall behind on your bills post-bankruptcy, the utility company will shut off your service and keep your deposit. However, you can negotiate with the utility company to have the deposit “modified” under the provisions of the Bankruptcy Code that relate to utilities. This is definitely something I do not recommend you attempt without competent legal counsel.
Find out more about filing for bankruptcy in Maryland
If you’re considering filing for bankruptcy to prevent shut-off of your utilities or to get service restored, or to resolve other debt issues, talk to a Maryland bankruptcy attorney first. Call our Greenbelt, MD bankruptcy lawyer’s office at 301-441-8780 to schedule an appointment. Ask for Danielle Chrisman, who can direct your call to the appropriate professional to meet your personal needs.
The Burns Law Firm can help you determine whether filing for a Maryland bankruptcy is your best option and ensure the most satisfactory resolution to your bankruptcy should you choose that option. Remember, we are professionally licensed federal “Debt Relief Agents” qualified to practice bankruptcy law in United States Bankruptcy Courts in Maryland and Washington D.C. We file for individuals seeking bankruptcy protection under federal law.