Quiz #64 (Can a Chapter 13 debtor pay tithes and offerings to their church?)

Tom and Jenny (husband and wife) have made some financial mistakes and have been forced to file for Chapter 13 bankruptcy.  To discharge their debts in Chapter 13 the debtors must pay their disposable income to their creditors for at least 36-months.  Tom and Jenny are also religiously devoted and desire to pay 10% of their gross income as tithing to their church (which, over a three-year period, totals nearly $15,000).  In contrast, they are proposing to pay disposable income of $294 per month which, over a 36-month period, totals $10,584.  The Chapter 13 objects arguing that Tom and Jenny's proposal is in bad faith.  The Chapter 13 Trustee also argues that the "Debtors should not be permitted to pursue their salvation on the backs of their unsecured creditors."  In re Wade, 612 B.R. 70, 75 (Bankr. E.D.N.C. 2019).  Who wins in this situation?  Tom and Jenny or the Chapter 13 Trustee? 

 

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Answer: Tom and Jenny prevail in this situation.  Under the Religious Liberty and Charitable Donation Protection Act, the amount of tithing that Tom and Jenny (i.e., the debtors) pay is not included in the disposable income calculation provided that the amount is less than 15% of their gross income.  See 11 U.S.C. § 1325(b)(2)(A); See also In re Petty, 338 B.R. 805 (Bankr. E.D. Ark. 2006).

 

 

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