• Can a bankruptcy court reject a debtor's bankruptcy petition on the ground that it calls for monthly contributions of $100 to the debtor's church? Yes, concluded a bankruptcy court in New Mexico. The debtor filed a "Chapter 13" (wage-earner's) bankruptcy petition that listed $22,000 in debts. The plan called for only 2% of unsecured debts to be satisfied over the next four years. The largest unsecured creditor (a local bank) objected to the petition on the ground that the plan did not provide for the payment of all of the debtor's disposable income to the bankruptcy trustee. Among other things, the bank pointed out that the debtor's plan called for monthly contributions of $100 to the debtor's church. The court noted that the right of a bankruptcy debtor to make charitable contributions has been addressed in several decisions. Nearly all courts have concluded that debtors can make no contributions whatever, or very minimal ones (i.e., $1.50 per week in one case). The court agreed with these prior rulings. It observed: "By allowing a debtor to deduct contributions to any organization, the court necessarily is forcing the debtor's creditors to contribute to the debtor's church or favorite charity. Congress could have intended no such result." Accordingly, the court rejected the debtor's bankruptcy petition. In re Tucker, 102 B.R. 219 (D.N.M. 1989).
© Copyright 1990, 1998 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m05 m08 c0390