Tithing Prior to and During Bankruptcy

            Many of my clients at Halcomb Singler, LLP, are very dedicated to tithing to their church or religious institution.  I have met with many people who continue to give 10% even though they are struggling with providing basic necessities for their families.  So it is understandable that these people are concerned that if they file bankruptcy they will not be able to tithe for an extended period of time or that their tithing will somehow be looked at negatively or that the bankruptcy trustee.  I am not here to judge whether or not it is a good idea to tithe while struggling financially and respect that different people may have different religious beliefs when it comes to tithing.  However, this issue seems to come up quite often with clients so I wanted to discuss it on my blog.

           I am happy to report that in many situations tithing is perfectly fine before, during and after the filing of a bankruptcy petition in the Southern District of Indiana.  However, as with anything else under the law there are limits and exceptions to this rule.  The first exception is that you must have been tithing prior to bankruptcy in order to continue to tithe during the bankruptcy.  The reasoning behind this is that the bankruptcy trustee will likely argue that if you have not been tithing all along and you just began tithing on the eve of the filing of the bankruptcy petition that these excess funds should go to your creditors instead of your religious institution.  So, if you aren't a regular churchgoer and haven't tithed in 10 years it is likely that claiming a significant charitable cash donation to your church just prior to the filing of your bankruptcy will cause your bankruptcy trustee to file an objection.  Bankruptcy trustees will often ask for records of tithing from your church and will also examine your last income tax returns to identity whether you have been tithing for a significant period of time.  But if you write a check to your church each month for $100.00 and have done so for the past two (2) years prior to the filing of the bankruptcy petition you should have no problem (unless you have very low income....see the next paragraph).

                In addition to examining how long you have been tithing, a bankruptcy trustee will also look at the amount of your monthly tithing.  I realize that to tithe means to give 10%, but many people use the word tithe while giving various amounts.  Of course, the more money you make the more money you are able to give to your church without drawing an objection from the trustee.  In fact, so long as you have been giving consistently, you are able to give up to 15% of your monthly gross income to any "qualified religious or charitable entity or organization."

                Finally, what exactly is a charitable entity or organization?  The bankruptcy code, in 11 U.S.C. 548 (d)(4) defines a charitable entity or organization as:
         1.  An entity described in section 170(c)(1) of the IRS Code of 1986; or
         2.  An entity or organization described in section 170(c)(2) of the IRC Code of 1986.

          What the heck does this mean???  Basically, it means that if your religious organization has a place of worship it is more than likely a charitable entity or organization.  Overall, the good news is that those who are devout in their religious beliefs are not judged by the bankruptcy code.  The bottom line is that if you have always tithed your 10% that does not have to change simply because you now need to file a bankruptcy petition.

          I am an attorney with Halcomb Singler, LLP, in Carmel, Indiana.  Before you take a 401k loan, use your retirement account to pay off debts or start borrowing from relatives I encourage you to speak to a bankruptcy attorney to see whether bankruptcy may be used to improve your financial situation.  Bankruptcy is not for everyone.  However, in my opinion if you are having a very difficult time financially you should be advised of all of your options.  If you live in Hamilton, Marion, Boone, Tipton, Howard, or Madison County feel free to contact Halcomb Singler, LLP, at 317-575-8222 or click here to fill out our information sheet and we will contact you for an appointment.  There is no consultation fee for those considering bankruptcy.

Halcomb Singler, LLP, is a debt relief agency.  It helps people file for bankruptcy under the bankruptcy code.  No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so.  The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.