Here is a copy of a standard letter here in Utah, adding a deposit of $156, which will be refunded in a year.
So I had a client call me two days ago. We had filed a chapter 7 for them 3 months ago, and a small municipality here in Utah shut off their water, in spite of having notice of the bk, and in spite of both myself and my client speaking with the manager of their city utilities. The client started calling me at 7:45 a.m., and I started calling the city at 8 a.m.
We knew that the utilities manager was in the office, because she had spoken with my client at 7:44 a.m., but she kept sending my calls to voicemail. I had to threaten a bankruptcy lawsuit for sanctions in a tersely worded email to the city attorney, the assistant city attorney, and even their paralegal. An hour later, the water was back on. Seven hours later, I received an email from the city attorney stating:
As you may know, the utility service was turned back on today for your clients. Please be advised that the City of XXXXXXX will insist that an assurance of payment be provided once an order is granted per 11 U.S.C. §366. We also request that you notify us when that occurs and provide us with a copy of the signed order. In the meantime, please email us a copy of the bankruptcy petition filed in June for our records.
Now here’s where it gets interesting. 11 U.S.C. §366 requires that :
(a) Except as provided in subsections (b) and (c) of this section, a utility may not alter, refuse, or discontinue service to, or discriminate against, the trustee or the debtor solely on the basis of the commencement of a case under this title or that a debt owed by the debtor to such utility for service rendered before the order for relief was not paid when due.
(b) Such utility may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date. On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment.
(A) For purposes of this subsection, the term “assurance of payment” means—
(i) a cash deposit;
(ii) a letter of credit;
(iii) a certificate of deposit;
(iv) a surety bond;
(v) a prepayment of utility consumption; or
(vi) another form of security that is mutually agreed on between the utility and the debtor or the trustee.
Simply put, you may be required to pay an additional deposit to continue using services. Yes, they can require this. Yes, you can fight it, but only if it’s unreasonable, and I’ve seen the new deposit for residential services go as high as $500.
And yes, they can shut off your utilities if you don’t pay the deposit.