Congress Puts Credit Card Companies Ahead of ReligiousObligations

Thu Sep 7 16:45:12 PDT 2006

In my view the interpretation of the Bankruptcy Code by the judge in the Diagostino case is questionable. A better interpretation would continue to allow charitable contributions to be included in the budget. (I could go into details, but this is the religionlaw list, but not the bankruptcy list.)

Even as interpreted in Diagostino, the Code doesn't actually prevent chapter 13 debtors from making charitable contributions, but rather does not include such contributions as budgetable expenses for above-median income debtors (with a requirement that projected disposable income beyond the budgeted amount be paid into the chapter 13 plan for the benefit of creditors for five years). A lot of above-median income debtors are finding that the total budget allowances under the 2005 amendments are more generous than under prior law, with smaller payments to creditors required than before. Some of that slack can be used to make charitable contributions, if the debtors so choose.

It might also be noted that wage garnishment laws (outside bankruptcy) do not make special provision for payment of tithes or other charitable contributions, IIRC.

I'm not saying the 2005 amendments were well-drafted or balanced, but the opponents of the amendments, such as the NACBA, sometimes overstate the case against the amendments.

Mark Scarberry
Pepperdine

________________________________

From: religionlaw-bounces at lists.ucla.edu on behalf of Douglas Laycock
Sent: Thu 9/7/2006 3:28 PM
To: religionlaw at lists.ucla.edu
Subject: Re: Congress Puts Credit Card Companies Ahead of ReligiousObligations

I am not aware of any cases of the kind Jim asks about.  There are a handful of cases where the parent joins a religious order or commune, takes a vow of poverty, and says he is unable to pay the child support.  Hunt v Hunt in Vermont is one I remember.

The Religious Liberty and Charitable Donations Protection Act, codified in sections 544, 548 and somewhere in chapter 13 (1325?) of the Bankruptcy Code, never affected child support or spousal support, because those are not dischargeable debts.  It protects churches from suits by bankruptcy trustees to recover past contributions, and it allowed debtors in chapter 13 plans to make contributions part of their budget.

The 2005 "reform" Act was drafted by lobbyists and Congressional staffers who refused to consult with experts in the field.  It tries to force many more debtors into chapter 13, and if this judge is right, it carves half the population out of the chapter 13 provisions of the Donations Act.  I'm sure that will be a surprise to most of the legislators who voted for it.  This was not on anybody's radar screen so far as I know.

Quoting James Maule <maule at law.villanova.edu>:

> Not knowing very much about the details of bankruptcy law and the 
> other areas of the law mentioned in my questions, and confessing to 
> not knowing the specifics on the tax issue raised below, I ask:
>
> Have there been any cases in which a parent argued (successfully or 
> not) that tithing "trumped" child support payments?
>
> Have there been any cases in which an exspouse, or soon to be 
> exspouse, argued (successfully or not) that tithing "trumped" alimony 
> or temporary spousal support payments?
>
> Have there been any cases in which an employee argued (successfully 
> or not) that tithing "trumped" garnishment of wages for tax or other 
> debt collection purposes?
>
> In other words, is this the first time the "tithing trumps" argument 
> has been presented to a court, or are there other decisions against 
> which this statutory change can be analyzed and perhaps contrasted 
> orharmonized?
>
> Jim Maule
>
>>>> rheckmann at altrionet.com 9/7/2006 3:33:39 PM >>>
> COURT: CREDIT CARD COMPANIES PUT AHEAD OF CHURCH TITHING BY 
> CONTROVERSIAL 2005 BANKRUPTCY REFORM LAW
> WASHINGTON, D.C.//September 7, 2006////Thou shalt have no gods before 
> me ... except for MasterCard, Visa and American Express.
>
> That's the way the United States Bankruptcy Court for the Northern 
> District of New York is reluctantly interpreting the controversial 
> U.S. bankruptcy reform law that went into effect last October. The 
> court says those going through bankruptcy may not tithe to their 
> church or make other charitable donations * until after they have 
> paid off credit card companies and other creditors. Before the new 
> law went into effect, bankruptcy court judges were required to permit 
> debtors to tithe a portion of their income on a regular basis.
>
> The 2005 law could have a major impact on the large number of 
> Christians and members of other faiths that are called upon to tithe 
> a portion of their income on a regular basis. More than two million 
> Americans filed for bankruptcy protection in 2005, and hundreds of 
> thousands will do so during 2006.
>
> Henry Sommer, president of the National Association of Consumer 
> Bankruptcy Attorneys (NACBA), said: "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."
>
> Sommer added: "Our nation's founding fathers who envisioned a 
> separation of church and state never imagined that this division 
> would be used to engorge the profits of moneylenders at the expense 
> of churches."
>
> In the case, the debtors, Frank and Patricia Diagostino, filed 
> chapter 13 bankruptcy on March 1, 2006. In the paperwork required 
> under the means test, the debtors listed a monthly expense of $100 
> for "continued charitable contributions." This expense would reduce 
> the disposable income available to pay unsecured creditors from $80, 
> 351.25 to $74,351.25 (at the rate of $100 per month for five years).
>
> The trustee in the Diagostinos' case objected to the expense. The 
> 2005 bankruptcy reform law enumerates several "reasonably necessary" 
> expenses that are allowed, such as health insurance and disability 
> insurance, but does not mention charitable contributions as such. 
> According to the IRS guidelines which dictate permissible expenses in 
> bankruptcy, charitable contributions may be included under the 
> category of "other expenses" only in very limited circumstances, such 
> as being a minister with an employment contract requiring tithing.
>
> In his August 28, 2006 opinion (In re: Diagostino and Diagostino, 
> Case No. 06-10384), U.S. Bankruptcy Judge Robert E. Littlefield, Jr. 
> ruled: "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."
>
> ABOUT NACBA
>
> The National Association of Consumer Bankruptcy Attorneys 
> (http://www.nacba.org) is the only national organization dedicated to 
> serving the needs of consumer bankruptcy attorneys and protecting the 
> rights of consumer debtors in bankruptcy. Formed in 1992, NACBA now 
> has more than 3300 members located in all 50 states and Puerto Rico.
>
> CONTACT: Patrick Mitchell, (703) 276-3266 or pmitchell at hastingsgroup.com.
>
>
>
>
> --
> Ross S. Heckmann
> Attorney at Law
> Member, NACBA
> 1214 Valencia Way
> Arcadia, CA  91006-2406
> 626-256-4664
> Fax: 626-256-4774
> E-mail: RossS.Heckmann at gmail.com
> _______________________________________________
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Douglas Laycock
University of Michigan Law School
625 S. State St.
Ann Arbor, MI  48109-1215
  734-647-9713

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