I’m back with more information on what “6 months of food, fuel and supplies” really means. The last time we talked about grocery store gift cards, are they considered an exempt asset? Today I would like to mention a few things related to paying your utility bills early.

Let’s go back to February of this year. A married couple filed a chapter 7 bankruptcy petition with a logical intent to provide 6 months of fuel and/or groceries, as allowed by the specified exemptions. Specifically, they listed on their Schedule C prepaid utilities for a total amount of $3,333.50. His trustee objected.

The debtors reasoned thus. As we’ve said before, ARS 33-1124, Arizona’s food and fuel exemption law, allows for a vague “6 months of food, fuel, and supplies.” Because they couldn’t simply buy an equivalent amount of electricity or natural gas and store it in their backyard shed, the debtors calculated their average monthly utility bills and prepaid an amount equal to 6 months.

There is a catch. The aggregate amount for Schedule C could be broken down as follows: “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 $183.50.”

The Court agreed that providing in-kind 6 months of potentially dangerous and volatile fuel (would you like your neighbor to store 6 months of propane in his garden shed?) is illogical, unsafe and simply illegal. Therefore, unlike the gift card example, prepaid was considered an acceptable substitute.

However, the Court later questioned whether these public services really 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]Any material, such as coal, oil, gas, wood, etc., burned to supply heat or power……[F]isible material from which nuclear energy can be obtained, such as in a nuclear reactor……”

Thus, the Court concluded that “the supply of natural gas or electricity is 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 hot; Quest (phone/Internet) and City of Phoenix (garbage/water) are out.

What have we learned today?

1. Prepayments for utilities that provide “fuel” may be exempt for a monetary amount equal to 6 months of payment.
2. Internet/phone and water garbage are not ‘combustible’ and therefore similar exemptions do not apply.

We can also infer from this that the Court does not consider these excluded services to be ‘provisions’, as this would change their exempt status. So, in closing, I’d like to repeat the question I asked earlier… What the heck is a provision?