We filed for Ch 7 Bankruptcy on 10/14 in Texas.

Problem & Background:

At the time we filed, we were behind on a city water bill by several
months and owed $175.75. The meter had been read on 10/10. We had a
$100.00 security deposit on file with the water department and that
was listed on Schedule B (item 3) as one of our assets.

On Oct 17, we faxed the Notice of Bankruptcy to the water department
because we were within a day or two of having our utility turned off.

On Oct 19, we received a letter via regular first class mail from the
city water department that was DATED Oct 19 stating that we had 21
days from the receipt of the letter to pay a security deposit of
$100.00 or that our water service would be terminated without further
notice. We had expected that we would be asked for deposits from our
utility companies so this did not concern us too much.

On Oct 21, we received two bills.

The first had a billing date of 10/19, showed a deposit credit of
$100.00 to our water account, and a new current charge of $8.79 (last
read date of 10/18), bringing the total amount due by Nov 7 to $84.54.

The second had a billing date of 10/20 but a meter read date now of
10/14 (date we filed for bankruptcy) and also an amount due of $84.54
by Nov 7 (in addition to the $100.00 deposit we now are still supposed
to pay.)

I understand that the second bill was probably a correction, meant to
show the reading date of the date we filed since we were supposed to
have been starting fresh. My question is this:

Questions:

1) Was the water company entitled to go ahead and apply the $100.00
deposit to the amount of the account that was outstanding as of 10/14
or should the the $175.75 been "set aside" until the debt was
discharged?
2) And if they weren't supposed to touch that $100.00 deposit until
the courts said they could, do they have to apply that towards the new
$100.00 deposit they are now asking for or can they now say they need
a $200.00 security deposit?
3) What do I need to do if they weren't supposed to do this and they
won't correct it on their own?


Since we're handling this on our own, I wanted to find out some
non-legal advice/opinions before I call them on Monday to find out
what is going on.

Thanks in advance!

On Sat, 22 Oct 2005 23:23:55 GMT, beth wrote:
1) Was the water company entitled to go ahead and apply the $100.00deposit to the amount of the account that was outstanding as of 10/14or should the the $175.75 been "set aside" until the debt wasdischarged?

Technically the water company shouldn't have offset until given permission. As a practical matter, there's probably nothing that can be done because the facts given don't justify a contempt proceeding and in any proceeding I'm certain that the Court would retroactively authorize the offset (and even if it wouldn't, the proceeding wouldn't be worth your time).2) And if they weren't supposed to touch that $100.00 deposit untilthe courts said they could, do they have to apply that towards the new$100.00 deposit they are now asking for or can they now say they needa $200.00 security deposit?

The Court cannot tell the water company to use the old deposit towards the new deposit when the outstanding prepetition indebtedness exceeds that amount; at worst, the utility has a secured claim of $100 and an unsecured claim for any balance. To get to use cash collateral requires consent or a costly proceeding and, besides, it would belong to the estate and not you.

The Court can determine the amount of the deposit (I read your original message to say that $100 was requested which I would guess is reasonable, but if there actually was $200 requested then it might be excessive unless justified by an increase in usage and/or rates since the original deposit was given) or the timing of making the deposit if the strict deadline set by the utility is impossible to meet.

The $84 or so remaining outstanding (the $175 old bill + $8 new bill -$100 deposit) should be the subject of a proof of claim filed by the utility and not paid by you.
3) What do I need to do if they weren't supposed to do this and theywon't correct it on their own?

I would discuss with the utility when you could pay the $100 deposit (making certain that that's what has been requested) and make certain that they understand that at this time any payment of the $(1)84 prepetition claim will be from distributions by the estate.

Try to have everything confirmed in writing. Letters would probably be best but these days email should suffice.