Bankruptcy

Charitable Contributions and Tithing Allowed Under the Means Test in Arizona Chapter 7 Cases (and in Chapter 13 Cases, for that matter!)

By Joseph McDaniel, Esq.

The Means Test works this way: if the debtor has income over the six months prior to the filing date which is below the median income for a family of that size and that geographical area, the debtor passes, and is permitted to file a Chapter 7 rather than a Chapter 13 bankruptcy case. Eezee-peezee.

But wait! There's more!

If the debtor has above-median income for that size family and location, the debtor may still be permitted to file a Chapter 7 Bankruptcy, depending on the actual expenses of the debtor over that six month period.

In a spasm of uncharacteristic good sense, Congress decided to permit charitable contributions to factor into the calculation of the Means Test, up to 15% of the annual gross income of the debtor in that year. There are a couple of additional requirements which I'll discuss when I get a Round Tuit.

But it's very clear that tithing, to a recognized Church, up to 15% of the annual gross income, will come out of expenses before creditors are paid in a Chapter 13 case (see 1325(B)(2)(A)).

Through various circumlocutions, the Religious Liberty and Charitable Donation Protection Act of 1998 has effect in Chapter 7 Means Test calculations as well.

So rejoice! There's at least one tiny sliver of common sense in the current version of the Bankruptcy Code!

And he said unto them, Then render unto Caesar the things that are Caesar's, and unto God the things that are God's.

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on April 18, 2010 (boomark / email).