Sunday, September 10, 2006

Many Americans seeking Chapter 13 bankruptcy protection will have to pay off all creditors before they can tithe or make other charitable donations under the new federal bankruptcy-reform law, a judge has ruled.

The opinion is a setback for some religious groups, since bankruptcy-court judges were required to let debtors tithe a portion of their income on a regular basis before the new law took effect in October.

“This change effectively closes the door for debtors who are above the median income from deducting charitable contributions as an expense,” U.S. Bankruptcy Judge Robert E. Littlefield of the Bankruptcy Court for the Northern District of New York wrote in his Aug. 28 opinion.

Until Congress amends the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the judge said, the “court’s hands are tied.”

The Religious Liberty and Charitable Donation Protection Act of 1998, signed by President Clinton, had allowed tithing and charitable giving under the federal bankruptcy code.

But under the bankruptcy act, people with incomes above the median level for their state are prohibited from making charitable donations while going through bankruptcy. However, the law allows those filing for bankruptcy earning less than their state’s median income to make such donations.

Henry Sommer, president of the National Association of Consumer Bankruptcy Attorneys, said he is disturbed by the effect of the new law on Americans who regularly provide a portion of their income to their churches.

“Many who practice their faith and believe they are bound by creed to tithe a portion of their income will find that Congress effectively decided that what credit cards want is more important than the deeply personal religious practices of Americans,” Mr. Sommer said.

The ruling could adversely affect contributions to the Church of Jesus Christ of Latter-day Saints (Mormons), most of whose nearly 7 million members donate 10 percent of their earnings to the church.

The change also could hurt donations to most evangelical Protestant faiths, which also expect members to give 10 percent of their income to their home church.

Officials of the National Association of Evangelicals (NAE) declined to comment on the New York ruling, saying they needed more information. But one NAE staffer noted that while evangelicals are expected to tithe, they are also expected to pay their bills.

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