A recent blog post by a colleague of mine, Jay Fleischman, a fellow consumer bankruptcy attorney, reminded me of one of the "gotchas" in the bankruptcy code that I thought I should pass on. If you owe money to a South Jersey utility company like PSE & G or Atlantic City Electric, you can wipe it out in bankruptcy, but it could end up costing you more. Why?
How Could It Cost You More?
The bankruptcy code allows utilities to demand payment of a security deposit as against future services within 20 days of the filing of your case. These deposits can be anywhere from $250 to $400 on average.
The problem that arose with Jay was that a friend of his had a client list a $42.50 debt to a utility. After the bankruptcy was filed, the utility closed down the old account, opened a new one, and demanded a $325 security deposit!
So What Do You Do?
The lesson here lines up with the advice I give to clients. If you owe them less than the average security deposit (i.e. less than $250), then just pay it before you file bankruptcy. This should then not trigger the security deposit provision of the bankruptcy code (because you are not seeking to discharge a balance) and allow you to continue on the same account.
If, on the other hand, you owe MORE than the average security deposit (i.e. more than $400), then list the debt on the bankruptcy and pay the security deposit later. You will save money.
Sometimes, however, the bill can include payment for something like a water heater and not the provision of gas or electric power. In this case, you should talk to an attorney about whether you should pay the utility portion of the bill and list the balance on the water heater.
I Can Help
If you live in the Gloucester County, NJ, area and are considering filing bankruptcy, please feel free to call my office at 856-432-4113 or contact me through this site to schedule a free consultation in my Woodbury office to discuss your case.
If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.