Tithing Allowed During Bankruptcy, Court Decision Wrong

WASHINGTON – Senators Chuck Grassley, Orrin Hatch and Jeff Sessions questioned a court decision made in a New York bankruptcy case. The Senators said in a letter to Attorney General Alberto Gonzales that the decision "inaccurately interprets how tithes are to be treated under the bankruptcy laws" and "runs counter to Congressional intent."

In the case, In re Diagostino, the court found that above-median income debtors in Chapter 13 repayment plans cannot deduct charitable contributions when calculating their disposable income under the means test. The Senators cited a 1998 law authored by Grassley, Hatch and Sessions that protects tithing and charitable giving by individuals who are recovering from bankruptcy. Nothing in the comprehensive bankruptcy reform legislation that was signed into law last year was intended to change the right to allow such contributions in bankruptcy. The three Senators were also the lead sponsors of the 2005 bankruptcy law.

The New York case arose because a trustee objected to the inclusion of charitable contributions in a proposed Chapter 13 repayment plan. The Department of Justice has responsibility for Chapter 13 bankruptcy trustees. The Senators asked the Attorney General to file court papers in appropriate cases to correct this misinterpretation, as well as issue mandatory guidelines to the trustees so they do not object to reasonable charitable contributions in future cases.