The Consolidated Appropriations Act, 2021 (“CAA”) was signed into law on December 27, 2020. As mentioned in this prior post, the CAA contains many amendments to the Bankruptcy Code which impacts creditors and other interested parties to a bankruptcy proceeding.
One such amendment impacts section 366 of the Bankruptcy Code. Under Section 366 of the Bankruptcy Code, a debtor must provide adequate assurance of performance to the utilities provider in order to continue receiving utilities during the court of the bankruptcy case. Section 366(b) states:
Such utility may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date. On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment.
In other words, prior to the enactment of the CAA, a utility provider may discontinue utility services to an individual debtor who failed to provide adequate assurance of payment during the bankruptcy case. “Assurance of payment” is defined in Section 366(c)(1)(A) of the Bankruptcy Code.
The CAA amends Section 366 of the Bankruptcy Code to prevent a utility provider from discontinuing utility services to an individual debtor provided that the individual debtor continues to pay all other post-petition utility payments, even if no adequate assurance of payment was provided.
The text of Section 366(d), the additional provision added to the statute by the CAA, is set forth below:
(d) Notwithstanding any other provision of this section, a utility may not alter, refuse, or discontinue service to a debtor who does not furnish adequate assurance of payment under this
section if the debtor—
(1) is an individual;
(2) makes a payment to the utility for any debt owed to the utility for service provided during the 20-day period beginning on the date of the order for relief; and
(3) after the date on which the 20-day period beginning on the date of the order for relief ends, makes a payment to the utility for services provided during the pendency of case when such a payment becomes due.
This provision sunsets in one year, December 27, 2021.
RELATED: Amendments to the Bankruptcy Preference Statute in the Consolidated Appropriations Act, 2021.
Carl D. Neff is a partner with the law firm of Pierson Ferdinand LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at carl.neff@pierferd.com.