The Water Departments’ Billing After Filing

Background:  On the day you file for relief under the Bankruptcy Code, your life is thereafter divided into pre-petition, before you filed, and post-petition, after you file.  When anyone asks us if a debt was discharged or included for discharge in a bankruptcy case that issue is the first one that we must resolve:  when was the debt incurred?  It is the same thing about assets, like workers’ compensation, or inheritance or any other lump sum income.  When did the debtor become entitled to the money?

Bankruptcy deals with what you owed and/or owned on the date of filing with a few exceptions.  I can hear you saying what are those exceptions?  If someone dies within 180 days of filing the petition the court treats it as if you owned it on the date of filing. The other very big exception is when you convert from a Chapter 13 to a Chapter 7.  Debts incurred after filing the Chapter 13 are included in the debts for the Chapter 7.  Not all debts are dischargeable, but you will need to ask your attorney (or me if you are my client) which debts are and are not dischargeable.

So, one of the major cities in our practice area refuses to turn off the water when you move out of your home unless someone else signs up to receive service there.  So when my clients are walking away from their home in their cases they may still have water bills haunting them.  Additionally, Debtors are still responsible for maintaining any property until it is sold … either by foreclosure or even a short sale. 

How can the water department get away with billing debtors after they filed bankruptcy?  First, any amounts owed to the water department on the date of filing will likely be discharged.  Second, if amounts are going to be discharged then the utility is entitled to receive a reasonable deposit.  The city then starts a new bill for the new amounts. If debtors have moved out, then what water are they using? The city charges for sewers and the city’s employees have told me that even if you are not using any water your land is still using the storm sewers.  Let me run through one way that we have proposed to resolve this issue.  I have suggested to several clients that we give their addresses of their real estate to my Meetup House Flipper’s group in hopes that they are interested in making an offer on the property.  This provides an option of asking that any remaining water bills be paid at closing before the mortgage company is paid. 

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