Duke Energy in Ch7

[Wilco]

I filed Ch7 on 2/9/10. At the time, I had a $306 balance with Duke Energy, so it was included in the petition. I had a $160 deposit on file with them since I initiated the utility. I have now received a "final bill", showing the $306, minus the $160 deposit which was applied to that amount, and an amount due of the difference. They do know I filed BK since my lawyer contacted them when they left a shutoff notice on my door a week ago.

My question is, are they allowed to apply the deposit to an amount that was declared and will be discharged? Should they be sending me a bill for the remainder? I don't seem to have any paperwork regarding the deposit other than the receipt for it. I know they can keep the deposit and apply it to your account if you default and get shut off, but I'm not sure if the BK rules will negate that since I should be declared as not responsible for the $306 balance. Am I right or wrong?

Thanks

[justbroke]

My question is, are they allowed to apply the deposit to an amount that was declared and will be discharged?

Yes, this is called the Right of Setoff and is allowed under 11 USC 366.

Should they be sending me a bill for the remainder?

Technically, they didn't need to send a bill, but they are just showing that they setoff the balance with the deposit.

I don't seem to have any paperwork regarding the deposit other than the receipt for it. I know they can keep the deposit and apply it to your account if you default and get shut off, but I'm not sure if the BK rules will negate that since I should be declared as not responsible for the $306 balance. Am I right or wrong?

You are part right but mostly wrong. (See 11 USC 366(4) below). If this wasn't a Utility company, then the creditor would need to file a Motion with the court for Relief from the Automatic Stay in order to keep property of the Estate. This even affects the IRS when they desire to set off your past due taxes with future refunds! However, under the Code, utilities are special!

11 USC 366(4) Notwithstanding any other provision of law, with respect to a case subject to this subsection, a utility may recover or set off against a security deposit provided to the utility by the debtor before the date of the filing of the petition without notice or order of the court.

[Wilco]

Thank you for the quick and thorough response. Much appreciated!

[justbroke]

That's what we are here for! Good luck!