For many, tithing is much more than simply a donation to a church, synagogue or mosque. When a person files a Chapter 7 or Chapter 13 bankruptcy, the issue is whether charitable donations should continue while the person is seeking a discharge of financial obligations under the federal bankruptcy laws. Fortunately, Congress has answered this question.
After Congress passed the bankruptcy reform bill in 2005, several bankruptcy courts gave contradictory opinions as to whether a debtor in Chapter 13 bankruptcy should be allowed to continue tithing. One bankruptcy court found that under the 2005 changes a Chapter 13 debtor could not tithe until unsecured creditors were paid. In response to these differing opinions, Congress passed the Religious Liberty and Charitable Donation Clarification Act of 2006 which clarifies a debtor's right to continue tithing during bankruptcy. Under this law, bankruptcy debtors are allowed to continue tithing and can include it as an expense in the proposed monthly budget submitted to the bankruptcy court. Debtors are permitted to contribute up to fifteen percent (15%) of their yearly gross income.
If you intend to contribute a significant amount of your income to tithing or to charitable donations, the bankruptcy trustee may require proof at your 341 Meeting that you have made similar contributions in the past. If it appears that you have suddenly started tithing on the eve of bankruptcy, the trustee may object to your newfound generosity and claim that it is a fraudulent attempt to avoid paying creditors. On the other hand, if you have consistently donated to a church in the past, you will be allowed to continue your donations. Finally, if the bankruptcy court confirms a plan that includes tithing or charitable contributions, you are expected to follow through. If you find that you are unable to make the donation, contact your bankruptcy attorney immediately.
For the debtor who can demonstrate a history of charitable donations, donating and tithing during a Chapter 7 or Chapter 13 bankruptcy are protected by federal law. Discuss your intent to tithe or make charitable donations with your bankruptcy attorney. Your attorney can help you determine the appropriate donation level to help your religious organization and help yourself during bankruptcy.
Contact the experienced Chicago bankruptcy attorneys at Glanzer & Angres, P.C. at 1-877-337-2227 to discuss your specific situation, and to schedule your free, in-person consultation.