You can include debts to utility companies in your bankruptcy but the the utility company can require you to pay another deposit.

In In re Cunha, 1 B.R. 330, 333 (Bankr. E.D. Va. 1979), the bankruptcy court held that a utility company could not discontinue service but may require a deposit as “adequate protection”.

What is “adequate protection?” It isn’t defined in the Bankruptcy Code, so an example may help clear things up a bit.

When someone files bankruptcy, the Trustee divides that person’s assets among the creditors (with certain limitations, but we won’t talk about that right now). In a Chapter 13, certain creditors will be paid completely, but other creditors will be forced to compete for table scraps.

The creditors who don’t get paid in full – such as utility companies – are taking a risk when someone files for bankruptcy. In return for the obligation to keep pumping the house with electricity (or gas heat, phone, cable, etc.) that utility company needs protection against losing money in the bankruptcy.

In other words, the utility company says, “Wait – you mean to tell us that we may lose money from the old service and STILL have to give NEW service? Not fair!”

In cases like this, the court will Order that the creditor be given “adequate protection.” Such protection can include:

1) requiring the Trustee to make cash payments to the creditor;
2) giving the creditor an additional lien in the property; or
3) granting such “other relief.”

The third option is a catch all, allowing courts discretion to fashion the protection provided to a creditor.

So if you file for bankruptcy, don’t be surprised if your utility company demands a security deposit.