Are Utility Bills Considered a Preferential Payment?

[Lindsay]

Our lawyer asked for recent copies of our bills. He said that we didn't have to include utility bills unless we were behind. We are behind on some of the utilities, but not seriously delinquent and not in danger of shutoffs. We're current on electric and a month behind on gas, water, phone. If I pay them to catch up, is it considered a preferential payment? We weren't planning on including any utilities in bankruptcies. I was going to pay them this week, but I hope it won't cause any problems with filing. I know it doesn't matter with secured debts, but I don't know if utilities are unsecured or secured?

[HHM]

No, paying your utilities is not considered preferential

Also, keep in mind, making preferential payments does NOT effect your BK. The idea behind preferential payments is to allow the trustee to recover assets (namely cash) that should have been part of the BK estate. If the trustee thinks there has been a preferential payment, all the trustee does is request the money from the person or company you paid. If that person or company refuses to turn over the money, then the trustee sues that person or company. Your case is not going to be dismissed nor is your BK going to be considered abusive because you made a preferential payment.

About the only time you need to do anything with regards to a preferential payment issue (aside from cooperating with the trustee) is add the person to whom the payment was made as a creditor to your BK.

[CindyLou]

Just FYI, I would caution on including utilities if at all possible. They cannot shut off your service, but they can require you submit a deposit to keep your services, I think equal to 2 month's service. So unless you have a really large past due bill, it is not usually feasible to include utilites in a BK.

[Boscoe]

But your attorney and the trustee will not be pleased if you have a balance owed on filing date but do not include it. I would strongly recommend you catch up on all utility bills and not include them. Don't worry about preferential payments like this. The trustee will go after them if he chooses to. That is part of his job.