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22 February 2021 / John Erin McCabe

Consolidated Appropriations Act Amending Section 366 of the Bankruptcy Code for Utility Service

Topics: Bankruptcy


On December 27th, 2020, the Consolidated Appropriations Act of 2021 (CAA) was signed into law. The CAA amends the Bankruptcy Code which impacts creditors in bankruptcy matters.

One such amendment affects section 366 of the Bankruptcy Code, namely:  11 U.S.C. 366 – Utility Service. 

Section 366(b) provides:
 
Such utility may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date. On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment.
 
Prior to the CAA, this section of the Bankruptcy Code authorized a utility company to discontinue service to a debtor who fails to provide a cash deposit, surety bond, a certificate of deposit, or some other mutually agreed on form of security1

Now, the CCA temporarily amends Section 366 of the Bankruptcy Code to prevent a utility from stopping service, so long as the individual debtor pays the utility company for services rendered in the 20-day post-filing period and continues to make all other post-petition utility payments, even if the individual debtor did not otherwise provide the utility company with adequate assurance of payment required under the previous version of the code.

In plain speak, utility service should continue for debtors under this provision by simply paying the post-petition bills when they become due.  This provision sunsets on December 27, 2021, unless the bill is extended.

This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.

1
11 USC 366 (c)(1)(A)
 

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John Erin McCabe

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