Utility bills as consumer debt in Bankruptcy

Unlike most consumer debts, water and sewer bills are treated differently as far as being discharged in a Chapter 7 Bankruptcy.  Any unpaid balances due to the utility company would become a lien against the real property and can be enforced against the real property. A lien is usually preserved with a Financing statement and by notifying the tax assessing authority to place it on record to be discovered and listed via a Title Search before closing. If a sale, refinancing, or foreclosure occurs, the unpaid balance may be paid from the proceeds if there is enough money to cover the lien. If there are not sufficient proceeds to pay the lien, the lien will be extinguished. The bankruptcy discharge would eliminate the personal liability of the debtor to pay the utility company for the unpaid water bill. utility company as the creditor cannot seek to collect payment from the debtor for the unpaid pre bankruptcy petition debt. The utility company’s only remedy would be to enforce the lien against the real property. The utility company would be in violation of the bankruptcy stay and eventually the Discharge order if it contacts a debtor to demand payment in the above example. The order is essentially an injunction that bars any action to collect, recover or offset any discharged debt as a personal liability of a debtor.

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