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New Utility Rule Impacts Struggling Debtors

Posted By admin || 9-Oct-2010

New Utility Rule Impacts Struggling Debtors

The Public Utility Commission just approved a rule that would allow electricity providers to prevent a consumer from switching companies if they fail to pay their bill. The new rule will only apply to consumers who are on a payment plan for their electricity bill. However, people who are struggling with debt and considering bankruptcy are often behind on their utility bills and the new rule could leave many without lights.

How The Rule Would Work

A consumer behind on their electricity bill by a few months and facing a cut-off notice might sign up for what called a "deferred payment plan."  This payment plan allows the consumer to pay their delinquent bill overtime while keeping their lights on. The problem with this type of payment plan is that many people fall behind even with the deferred payment plan and then switch electricity providers. With the new rule, the household would not be allowed to switch electricity providers until the bill is completely paid off.  For debtors who can't continue to pay, this could mean living in the dark until they can find the means to pay.

Fortunately, if someone is facing this type of scenario and they file bankruptcy, they would be able to discharge those old electricity bills and start anew. Many debtors who are unable to pay past utility bills benefit from bankruptcy because the automatic stay prohibits the utility company from turning off the debtor's services because of past due bills. However, the debtor is still responsible for any bills from the date of the bankruptcy filing forward.  In other words, they cannot continue receiving electricity, water, heat etc, if they fail to remain current on their utility bills after they file bankruptcy.

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