A bankruptcy discharge is supposed to deliver a fresh start. For Rose Thomas of Harvey, Illinois, it delivered 273 days without running water. In In re Thomas, No. 25-01000 (Bankr. N.D. Ill. Sept. 17, 2026), Judge Michael B. Slade called the City of Harvey’s conduct the most egregious discharge violation he had ever seen and sanctioned the City accordingly.
The Facts
Ms. Thomas, 68, filed Chapter 7 in January 2025 and scheduled a $1,000 debt to the Harvey Water Department. She received her discharge on April 22, 2025, and the City was served with notice.
The City of Harvey kept billing her anyway. Its May 2025 bill included the discharged balance and threatened disconnection if unpaid by May 25. The City shut off her water on May 21, four days before its own deadline.
Ms. Thomas brought her discharge order to City Hall that same day. Water Department staff refused it. Her complaints to the mayor’s and clerk’s offices went unanswered. Meanwhile, the City’s outside counsel told the Water Department, more than once, that it could not collect discharged debts or cut off service for them. Nothing changed.
For nine months, including a Chicago winter, Ms. Thomas hauled five-gallon jugs of water from friends’ homes so she could drink, cook, and flush her toilet. She reopened her case on her own in December 2025. Service was not restored until February 18, 2026, days after a show cause hearing.
The Holding
The court held the City of Harvey in civil contempt for willfully violating the discharge injunction under 11 U.S.C. § 524(a)(2). It found two separate violations. Every post-discharge bill demanding the old balance was a new collection attempt. Shutting off service over discharged debt was an effort to collect from Ms. Thomas personally. The City’s argument that it was only pursuing lien remedies failed.
The court awarded:
- $500 for bottled water
- $40,950 for emotional distress ($150 per day for 273 days)
- $41,450 in punitive damages, matching compensatory damages
- Reasonable attorneys’ fees to pro bono counsel Jenner & Block
Two rulings stand out. First, Section 106(a)(3)’s bar on punitive damages against governmental units did not apply. The U.S. Bankruptcy Judge ruled that provision only limits the abrogation of sovereign immunity, and municipalities like Harvey have none. Second, Harvey forfeited any common-law municipal immunity from punitive damages by never raising it; its counsel even conceded punitive damages were likely. The court also rejected leniency based on the City’s financial distress.
What Municipal Utilities Must Do
The opinion’s core message is that ad hoc responses are not enough. A utility that regularly serves customers who file bankruptcy must have real procedures to comply with the automatic stay and discharge injunction. Judge Slade directed the City of Harvey to work with bankruptcy counsel to adopt procedures that, at a minimum:
- Route bankruptcy notices to the departments that need them, rather than filing them away.
- Flag customer accounts protected by the automatic stay or a discharge.
- Configure billing software to segregate and, when appropriate, write off prepetition balances.
- Build safeguards that make it nearly impossible to shut off service over discharged debt.
- Train employees to follow these procedures.
The court pointed to mortgage servicers’ bankruptcy-modified statements under Regulation Z as a model. It also found Harvey ignored its own Municipal Code, which requires certified-mail notice and a hearing before termination, raising due process concerns under Memphis Light, Gas & Water Division v. Craft.
The Takeaway
A utility with good procedures that makes a good-faith mistake will likely face lighter sanctions. One that does nothing will eventually violate the Bankruptcy Code and pay for it. Every municipality and utility should review its bankruptcy procedures now, before a court does it for them.
