The New York Bankruptcy and Consumer blog has noted an interesting development in our nation’s bankruptcy law:
The US Bankruptcy Court for the Northern District of New York recently came down with a decision that could have a thunderous impact on every religious person who tries to get protection from their creditors while continuing to make regular charitable contributions.
You see, the court reluctantly concluded that the bankruptcy law prohibits people from continuing to make their regular contributions until AFTER their creditors have been paid.
The story comes to us from Yahoo Finance. The ruling came from a case where the debtors, as part of their Chapter 13 bankruptcy filing tried to list $100 in monthly expenses for “continued charitable contributions.” For the uninitiated, Chapter 13 bankruptcy is essentially a court-administered debt repayment plan over a period of about 5 years, where the debtor seeks to repay his or her creditors a greatly reduced amount of the total outstanding debt. The idea is that the creditors are at least getting something, as opposed to Chapter 7 bankruptcy where such debts are wiped-out entirely.
All Chapter 13 repayment plans must be approved by the court. Normally, a debtor is allowed, under bankruptcy law, to list a certain amount of income as designated for religious or charitable purposes. This is not an uncommon occurrence.
However, in an opinion issued August 28, 2006, Bankruptcy Judge Robert Littlefield Jr. ruled that the new bankruptcy law (which was passed just last year with overwhelming support in Congress) requires that tithing and charity payments take a back seat to paying off those credit card bills. Judge Littlefield stated:
This change [under the 2005 law] effectively closes the door for debtors who are above the median income from deducting charitable contributions as an expense unless they can establish the contributions fall under the IRS guidelines. The court does not agree with this awkward, bifurcated Congressional framework which makes charitable giving easier for some debtors and not others. Whether tithing is or is not reasonable for a debtor in bankruptcy is for Washington to decide. However, consistency and logic would demand the same treatment of all debtors … Until Congress amends [the 2005 Act], the court’s hands are tied and the tithing principles that this court once applied pre BAPCPA (the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005) have been effectively mooted.
A frustrated president of the National Association of Consumer Bankruptcy Attorneys vented
For religious Americans who find themselves deeply in debt due to job loss, catastrophic medical expenses or other circumstances, the 2005 reform legislation didn’t just reword the federal bankruptcy code, it also effectively rewrote Exodus and Deuteronomy. Many who practice their faith and believe that 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.
The judge’s ruling presents an interesting question for Mormons. Does payment of debts trump payment of tithing? Should it be a higher priority for you? How about for the nation at-large? And if payment of credit card debt does trump tithing, does that mean paying the entire bill from Visa? Or does it only apply to the original amount since Deuteronomy 23:19 frowns upon charging interest (note: written with toungue firmly in cheek)?
Or is this just another case of “rendering unto Ceasar?”