Chapter 7 Bankruptcy – "6 Months Food, Fuel & Provisions&quot…

Chapter 7 Bankruptcy – "6 Months Food, Fuel & Provisions&quot…

I am back with more information regarding what “6 months food, fuel and provisions” truly method. We last talked about grocery store gift cards – whether they are considered an exempt asset. Today I would like to mention a few things regarding prepaying your utility bills.

Let’s go back to February of this year. A married associate filed a chapter 7 bankruptcy appeal with a logical attempt to provide 6 months worth of fuel and/or provisions, as allowed under the stated exemptions. Specifically, they listed on their schedule C prepaid utilities in the aggregate amount of $3,333.50. Their trustee objected.

The debtors reasoned as such. As we have said before, ARS 33-1124, Arizona’s food and fuel exemption law, allows for an ambiguous “6 months food, fuel and provisions.” Because they could not simply buy an equivalent amount of electricity or natural gas and store it in their backyard discarded, the debtors estimated their average monthly utilities and submitted prepayment in an amount equivalent to 6 months time.

There is a catch. The aggregate schedule C sum could be broken down as follows: “the debtors paid Qwest the amount of $1,000; Arizona Public Service, the amount of $1,400; the City of Phoenix, the amount of $750; and Southwest Gas Company, the amount of $183.50.”

The Court agreed that to provide in kind6 months worth of potentially hazardous and volatile fuel (would you want your neighbor storing 6 months worth of propane in their backyard discarded?) is illogical, unsafe and just plain illegal. consequently, unlike the gift card example, prepayment was deemed an permissible substitute.

However, the Court then questioned whether these utilities truly fell under the exemptions allowed by ARS 33-1124. Because ‘fuel’ has not been defined in Arizona case law, they turned to trusty old Webster, who defined fuel as “[A]ny material, as coal, oil, gas, wood, etc., burned to supply heat or strength……[F]issile material from which nuclear energy can be obtained, as in a nuclear reactor……”

consequently, the Court concluded that “providing natural gas or electricity are within the parameters of the definition. However, the deposits with the telephone/Internet provider or the City are not within the definition of fuel”. So, Arizona Public Service (electricity) and Southwest Gas (gas) are in; Quest (phone/Internet) and City of Phoenix (trash/water) are out.

What have we learned today?

1. Prepayments towards utilities providing “fuel” may be exempt for a monetary amount equaling 6 months of payment.
2. Internet/phone and water trash are not ‘fuel’ and consequently similar exemptions do not apply.

We may also deduce from this that the Court does not consider these excluded utilities as ‘provisions,’ as this would change their exemption position. So, in closing, I would like to repeat the question I have asked before… What in the world it a provision?

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