Released: September 14, 2006

No place for church in state of bankruptcy

Source: By Michele Bolton Morgan, Albany (NY) Times Union

Bankruptcy lawyers around the nation are blasting a revised federal tax statute that pits civil law against the spiritual commitments of the financially strapped faithful.

A federal bankruptcy judge in Albany ruled in late August that the Bankruptcy Abuse Prevention and Consumer Protection Act forbids debtors from deducting charitable contributions when calculating disposable income.

Judge Robert E. Littlefield Jr. said he had little choice but to reluctantly rule against an Adirondacks couple who sought to fight the new ban in bankruptcy court.
When Frank and Patricia Diagostino filed a Chapter 13 bankruptcy petition, they asked to be allowed to continue making their $100 monthly donation to the Sacred Heart Parish of Massena while they paid off their unsecured debts.

But Littlefield noted in his decision that the reform legislation clearly says such a contribution is not considered a reasonable expense when a family’s income is above the median level.

That means credit card companies and others owed money get first crack at available funds from someone filing for bankruptcy, even if that person has been regularly donating money to a church.

It’s a religious dilemma for those who believe, like the Diagostinos, that tithing a regular percentage of their annual income is a necessary expense.
“Thou shalt have no gods before me ... except for MasterCard, Visa and American Express,” said Henry J. Sommer, president of the National Association of Consumer Bankruptcy Attorneys.

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