DTE ENERGY UTILITY BALANCES IN MICHIGAN BANKRUPTCY
DTE Energy and other utility balances are low priority, unsecured debts in a Chapter 7 or Chapter 13 bankruptcy proceeding, unless you have paid a security deposit to open the service account.
That means that the debt is generally totally dischargeable in a Chapter 7 or Chapter 13 bankruptcy. When you file for bankruptcy under either Chapter, you will not be liable to directly pay to DTE or any other utility provider any past-due balance owed.
So what does that mean when you still need electricity service? Will DTE disconnect you? Do you get service for free after you file for bankruptcy?
To answer these questions, let’s first discuss some basic realities of Chapter 7 and Chapter 13 bankruptcy in Michigan.
DTE ENERGY UTILITIES IN BANKRUPTCY: PRELIMINARY CONSIDERATIONS
First, it’s important to recognize the differences between Chapter 7 and Chapter 13 bankruptcy.
A Chapter 7 bankruptcy is a “liquidation” bankruptcy in which, typically, you do not repay anything to your unsecured creditors. These debts are simply discharged, meaning that, at the end of the process, the U.S. Bankruptcy Court issues a permanent Federal injunction stating that you have no legal obligation to repay the debt you had prior to the date on which you filed the bankruptcy.
A Chapter 13 bankruptcy is a “reorganization” bankruptcy in which you do repay some or all of the debt you had prior to the date on which you filed the bankruptcy in monthly payments through a Bankruptcy Court-enforced and monitored payment Plan. Whatever amount you repay your unsecured creditors through this Chapter 13 payment plan is all that they get. The balance you may owe any individual creditor is then discharged as in a Chapter 7 (with exceptions).
Note the italicized text in the above two paragraphs.
Bankruptcy of either sort only assists you with the debt you had prior to the filing of the bankruptcy case. If, the day after you file bankruptcy, you go out and buy 19 laptops on a new credit card, you will not discharge that debt in your already-filed bankruptcy.
This is highly relevant with regard to DTE Energy and other utility balances due on the date of a Chapter 7 or Chapter 13 bankruptcy filing.
You will discharge what you owe to DTE the day you file bankruptcy but not what you owe for electrical utility service the day after. Or the day after that, and so on.
However, the moment you file for Chapter 7 or Chapter 13 bankruptcy, another injunction called the automatic stay against collections is immediately activated under Federal law. This automatic stay prevents DTE or any other creditor, for the most part, from engaging in any further collections activity for that pre-filing debt. A creditor who violates the automatic stay that a bankruptcy filing provides, can be liable to a debtor for that violation. As a result of these potential stay violations, DTE Energy monitors the bankruptcy cases filed in metro Detroit and is alerted when one of their customers files a bankruptcy petition, whether they have listed DTE Energy in their bankruptcy petition or not. If their system detects a bankruptcy filing by one of their customers, DTE will oftentimes close the existing account (even if it has a low balance and has never been late), and open a new account.
Thus, DTE cannot shut off your electricity, just as a creditor holding credit card debt cannot garnish your wages after a bankruptcy is filed.
Finally, no creditor who provides you a service is required to continue providing that service after you have discharged a debt owed for such service in a bankruptcy.
For example, if you owe your dentist $1,000.00 and file Chapter 7 bankruptcy, that $1,000.00 debt is discharged along with the rest of your unsecured debt (whether you want it to be or not).
Your dentist in all likelihood has no recourse available for collection of the debt and will be in violation of the automatic stay if she were to try and collect it from you.
This is too bad for the dentist. She will have to write that debt off. However, she does not have any obligation to extend services to you in the future. You will need to find a new dentist.
DTE and other utility providers have more State and Federal restrictions and obligations with regard to the denial of a utility service to residents of their service areas.
However, within the parameters of those legal obligations, DTE is just as entitled to shut your electrical service off as your dentist is to tell you to find someone else to fill your next cavity.
DTE ENERGY SECURITY DEPOSITS AND CHAPTER 7 AND CHAPTER 13 BANKRUPTCY
That all said, an immediate shut-off of your electrical service is not a customary outcome of a Chapter 7 or Chapter 13 bankruptcy filing.
DTE will, instead, immediately cancel your delinquent account and open a new account with a new account-number attached to it—and a $0.00 balance.
That old account will be written off and paid in part through your bankruptcy if a Chapter 13 or some of your assets are liquidated for creditors’ benefit in a Chapter 7.
DTE will likely require a security deposit for the new account.
This security deposit is an amount of money that DTE will hold onto in the event your (new) account becomes delinquent in the future.
This new account is a post-bankruptcy filing-date debt and is not subject to the automatic stay. Should you fail to pay your monthly DTE bill, it will again become subject to shut-off regardless of the bankruptcy filing.
The requirement that a security deposit be paid in this situation is legal and provided for in the US Bankruptcy Code, the Federal statute that governs the bankruptcy process. The United States Bankruptcy Code section 366 allows a utility to request a deposit amount for continuing utility services. DTE has some sort of formula by which it calculates the deposit amount and is based on the previous 12 months usage.
The only constraint that DTE or another utility provider has is that the deposit must be “reasonable.”
What is or is not “reasonable” will vary from case to case. An extreme example of a security deposit demand that would be unreasonable is a demand for a $300.00 deposit when the balance due prior to the filing of the bankruptcy was only $1.00.
What do you do when you believe that a DTE security deposit demand is unreasonable?
You talk to your experienced Michigan bankruptcy attorney.
If you have filed your bankruptcy without a lawyer, you will waste much time attempting to communicate with DTE.
Your bankruptcy lawyer will file a motion requesting the court set a security deposit amount that is reasonable and affordable. When competently drafted and prosecuted, DTE has a long history of simply not responding to such motions and allowing debtors’ attorneys to obtain default judgments granting the relief requested.
Without a lawyer, you are likely to fumble around, essentially begging for something that the Bankruptcy Court will grant very quickly when properly moved to do so.
DTE ENERGY & MICHIGAN BANKRUPTCY: THE BOTTOM LINE
The bottom line is that the filing a Chapter 7 or Chapter 13 bankruptcy is not always a magic bullet for relief. Additional steps, post-filing, are frequently required, and you need the right attorney on your side when this happens.
Attorney Walter Metzen has dealt with DTE Energy and other utility providers in Michigan Chapter 7 and Chapter 13 bankruptcy matters for over 20 years.
The Law Offices of Walter A. Metzen & Associates offers free consultations for those interested in the bankruptcy process and is experienced in determining and advising as to the best course of action when filing a Chapter 7 or Chapter 13 bankruptcy in Michigan.