is the water bill in her name already?

if it is in her name, you are fine, if it is in your name, you need to keep it on.

if the water company is municipal, yes you will be liable for the bill later, but that does not effect your eviction case.

regarding late penalty, depends on state law, Indiana, where I am at, the court do not allow late fees anymore, your lease must spell out additional fees as rent.