Bankruptcy Code Section 366: Utility debts and disconnection | Milwaukee, WI

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Home 9 Bankruptcy 9 Bankruptcy Code Section 366: Utility debts and disconnection

Bankruptcy Code Section 366: Utility debts and disconnection

by | Mar 5, 2020 | Bankruptcy

During winter months, losing power could mean freezing to death in Wisconsin and other states with consistently low temperatures. So, the energy company will not shut off your power, even if you cannot make payments during the winter months. 

However, falling so far behind could have disastrous results when the program ends in the spring. Once the moratorium is over, the utility company disconnects power for those who do not pay their bills. 

When the underlying reason for not making utility payments is simply not having the necessary income, there may be assistance options available. However, there may be other solutions to overwhelming debt that will not only keep your power on longer, but also free up income to cover all living expenses adequately. 

Protection from disconnection 

By filing for bankruptcy, you immediately get relief from creditors’ collection efforts through the automatic stay. A different section of bankruptcy law addresses utility debts, though. The U.S. Bankruptcy Code Section 366(a) states that the utility company cannot discontinue service or discriminate against you because of a debt incurred before the filing of the bankruptcy. 

Assurance of payment 

Section 366(b) qualifies this statement, though. Within 20 days of filing, either you or the bankruptcy trustee has to give the company “adequate assurance of payment.” This term refers to one of the following: 

  • Cash deposit 
  • Certificate of deposit 
  • Letter of credit 
  • Surety bond 
  • Prepayment for future utility use 
  • Some other agreed-upon property that secures the debt 

If you do not have the resources for one of these options, the court may get involved. A judge has the authority to modify the deposit amount or the security so that it becomes reasonable for all parties. 

Utility company rights 

The utility company has the right to cut off service 30 days after you file for bankruptcy if you have not provided assurance of payment during that time. The utility company does not have to get a court order or provide notice to you to take the action under these circumstances. 


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