BIRCH BAY WATER & SEWER DISTRICT

COMMISSION POLICY

SUBJECT: Procedures for Bankruptcy Notice

Purpose

This policy is designed to ensure the District promptly processes customer accounts during the bankruptcy period.

Terms

Assurance of Payment authorizes the utility to alter, refuse or discontinue service unless within 20 days of the petition date the debtor provides the utility “adequate assurance of payment” for post-petition service. USC Title 11 Section 366 unequivocally states that the utility can discontinue service if adequate assurance is not provided in the first 20 days of the case, although the court can order a modification if the utility and the debtor are unable to reach agreement on the assurance that was proposed. The act also permits the utility to set off or recover from a pre-petition deposit to pay a pre-petition bill without seeking relief from the automatic stay.

Attorney for the Debtor The attorney representing the debtor in a bankruptcy proceeding. The debtor can represent himself/herself during the bankruptcy.

Automatic Stay An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection actions against the debtor the moment a bankruptcy petition is filed, with very limited exceptions.

Bankruptcy Filing Date The date the bankruptcy is filed and the beginning of the collection stay. It may also be referred to in a bankruptcy notice as “the Petition Date”. Bankruptcy Notice A notice provided by the bankruptcy court notifying the District of a bankruptcy.

Bankruptcy Trustee A person appointed by a bankruptcy court to supervise the affairs of person or business which is in bankruptcy, determine both assets and debts, marshal (gather) and manage the assets if necessary, and report to the court. Most trustees in bankruptcy are full-time professionals and are paid from the estates of the debtors.

Chapter 11 This is used mostly by businesses. In chapter 11, the business may continue to operate its business (as “Debtor in Possession”) , but its creditors and the court must approve a plan to repay its debts. There is no trustee unless the judge decides that one is necessary; if a trustee is appointed, the trustee takes control of the business and property.

Chapter 13 The debtor can usually keep the debtor’s property, but the debtor must earn wages or have some other source of regular income and the debtor must agree to pay part of the debtor income to the debtor creditors. The court must approve the debtor’s repayment plan and budget. A trustee is appointed and will collect the payments from the debtor, pay the debtor’s creditors, and make sure the debtor lives up to the terms of the debtor’s repayment plan.

Chapter 7 A trustee is appointed to take over the debtor’s property. Any non-exempt property of value will be sold or turned into money to pay the debtor’s creditors. The debtor may be able to keep some personal items and possibly real estate ( exempt property) depending on the law of the State where the debtor lives and applicable federal laws.

Lien The right to take and hold or sell the property of a debtor as security or payment for a debt or duty.

Proof of Claim A written statement and verifying documentation filed by a creditor that describes the reason the debtor owes the creditor money. (There is an official form for this purpose.)

Reaffirmation Agreement An agreement by a chapter 7 debtor to continue paying a dischargeable debt (such as an auto loan) after the bankruptcy, usually for the purpose of keeping collateral (i.e. the car) that would otherwise be subject to repossession.

Secured Creditor A creditor holding a claim against the debtor who, pursuant to a lien, has the right to take and hold or sell certain property of the debtor in satisfaction of some or all of the claim.

Policy Guidelines

  1. Upon receipt of a bankruptcy notice, staff will review the customer’s account for the outstanding balance, service status, last bill date, and property owner.
  2. If the account has been disconnected prior to the bankruptcy date, the account will remain disconnected until the customer pays the pre-bankruptcy account balance and provides an Assurance of Payment on the post-bankruptcy account as outlined in Section 5 below.
  3. A final bill will be prepared on the existing account, called the pre-bankruptcy account, with the closing date being the bankruptcy date. The mailing address for the pre-bankruptcy account will be the Attorney of the Debtor’s address, or the address of the customer if the Debtor does not have an attorney. The pre-bankruptcy account will be exempted from all payment reminders and shut-off notices.
  4. A new account, called the post-bankruptcy account, will be attached to the premise in the name of the owner. The move-in date will be the Bankruptcy filing date.
  5. A letter will be mailed to the Attorney for the Debtor, acknowledging the receipt of the bankruptcy notice, the preparation and amount of pre-bankruptcy charges, a request for an Assurance of Payment equal to four months of average service charges, a notice of lien for the pre-bankruptcy charges, and an offer to contact the Finance Manager if the Attorney for the Debtor would like to discuss arrangements or alternatives to the Assurance of Payment.
  6. If the account has a balance due, the District will file a Proof of Claim with the Bankruptcy Court, and file a Certification of its lien with Whatcom County.
  7. Both the pre-bankrupt and new consumer account will have notes placed in their respective log with the bankruptcy information.
  8. A file folder shall be opened under the name and premise number of the account that shall contain copies of all notices, communications with the Attorney for the Debtor, Proof of Claim, a contact log, communication to the District from, and other information pertaining to the bankruptcy.
  9. A written contact log shall be created and placed in the file. All contacts by the District shall be noted in both the customers electronic note log and the written contact log.
  10. The file shall be placed in a file cabinet or similar storage area, separating active and closed bankruptcies.
  11. The District shall not send notices or contact the customer regarding the pre-bankruptcy account, unless the customer is acting as their own Attorney for the Debtor during the bankruptcy.
  12. When the District receives a cash or check deposit as an Assurance for Payment, it shall place these funds as a credit to the customer’s new consumer number and be applied to future charges.
  13. When the District receives final payment on the pre-bankruptcy account from the Bankruptcy Court or in settlement of the property lien, it will be applied to the pre-bankruptcy account. If there is a credit balance on the pre-bankruptcy account it shall be applied to the customer’s post-bankruptcy account.
  14. If there is a debit balance on the pre-bankruptcy account, when there is a sale of real property through the Bankruptcy Trustee that is free and clear of any liens, the District will communicate with the Trustee to determine if there are proceeds from the sale to which the District’s lien will attach. This will generally be the case because the District’s lien has priority over all other liens except for general taxes. If for some reason there are not proceeds for the District’s lien to attach to, then the post-bankruptcy account shall be written off only with the approval of the General Manager.
  15. Following receipt of final payment satisfying the pre-bankruptcy account balance or any write-off or inability to collect the pre–bankruptcy account in full, the customer bankruptcy file folder shall be moved from the active to the closed bankruptcy files.
  16. Monthly, staff shall prepare and review a report of accounts in bankruptcy. This report shall include by account number order, all pre-bankruptcy accounts and their balance.

Approved: April 11, 2013

bankruptcy_letter.docx