For many, being able to make charitable donations and continue to tithe to their religious organization is something that is extremely important to them. When their debts become more than they can manage many people begin to think about filing bankruptcy, and whether or not they will be able to continue making their donations is a major concern. Another concern is whether or not the donations they have already made will be affected if they file bankruptcy. Congress understood and recognized this. In 2006, Congress added the Religious Liberty and Charitable Donation Clarification Act to The United States Bankruptcy Code, but what does this Act actually mean?
When filing a Chapter 7 bankruptcy, the Religious Liberty and Charitable Donation Clarification Act allows charitable donations or tithing as long as there is an established history of the donations or tithing, and the amount is not extremely unreasonable in relation to your monthly gross income. Additionally, charitable donations and tithing may even help you qualify for a Chapter 7. In order to qualify for a Chapter 7 bankruptcy, you must first pass the means test. The means test makes sure you do not have enough income for a Chapter 13 Payment Plan instead. However, the means test does allow you to deduct certain monthly expenses from your gross income. Regular charitable donations and tithing is one deduction that is permitted and could even help you qualify to file a Chapter 7 bankruptcy.
As long as the monthly charitable donation or tithing can be proven to be regular and routine, then it will be allowed to be included as one of your regular monthly expenses. This means that you will be able to continue to make those donations or continue tithing while in bankruptcy.
It is important to keep in mind bankruptcy trustees are always looking for the Religious Liberty and Charitable Donation Act to be abused. Therefore, it is very important to make sure you have documentation that can establish that you were making your charitable donations or were tithing long before you even considered filing for bankruptcy, and that your donations or tithing were routine and regular. A letter from your organization maybe helpful.
The other thing to keep in mind is that the Act only allows you to donate or tithe up to 15% of your gross income. What this means is that if you donate or tithe more than 15% of your gross income, the charity or religious organization may be forced by the Court to turn over all of your donations and tithings.
If you are considering filing bankruptcy and are worried about the donations you have made and being able to tithe to your religious organization after filing bankruptcy, it is important to first consult with an experienced bankruptcy attorney. The attorney’s at the Law Office of David M. Goldman, PLLC can help you better understand the possible affects bankruptcy may have. Contact us today for a free initial consultation by calling (904) 685-1200.