Tithing and Bankruptcy

Friday, September 15, 2006
Tithing and bankruptcy

Daily Herald

A federal judge in New York has determined that credit card companies
have a greater claim on debtors than God.

Judge Robert Littlefield Jr. ruled that the new federal bankruptcy law
allowed him to reject a couple's Chapter 13 repayment plan that
included a $100 monthly charitable contribution as part of the
family's expenses.

At issue was a change in the federal bankruptcy law that went into
effect in October 2005 barring deductions for charitable contributions
when a debtor's personal income exceeds the state's median. It means
the charitable donation must be included in the family's expenses as
part of the bankruptcy plan.

"Whether tithing is or is not reasonable for a debtor in bankruptcy is
for Washington to decide," Littlefield wrote in his opinion. "However,
consistency and logic would demand the same treatment for all
debtors."

Littlefield's decision is not a precedent at this point, even within
the Northern New York judicial district where he sits, but it may give
creditors' lawyers ideas on how get debtors to put more money toward
paying back their clients.

The decision's is especially interesting in Utah, a state that has one
of the highest bankruptcy rates in the nation and where most residents
are members of The Church of Jesus Christ of Latter-day Saints, which
asks its members to pay 10 percent of their income as tithing.

We can understand why a creditor would seek to disallow a contribution
to a charity, especially when the debtor may be giving away 10
percent, or even more in some cases. Charity, by its nature, is a
voluntary contribution for which the donor receives no tangible
benefit.

Creditors naturally see the repayment of the debt as a higher priority
than a warm, fuzzy feeling, or even a claim of blessings from God.

While understandable, the view is a little cold-hearted. There is some
logic and law on the other side.

In 1998, Congress passed the Religious Liberty Act that allows those
in bankruptcy proceedings to continue to make charitable
contributions. The measure was co-sponsored by Sen. Orrin G. Hatch,
R-Utah, to protect churches from losing money. The law also shows
respect for religious beliefs that have nothing to do with one's
financial circumstances.

To tithe-payers, especially Latter-day Saints, the contribution is an
act of faith that will result in worldly blessings. To them, tithing
is a debt to a supreme creditor who is first in line.

Hatch spokesman Peter Carr said the new bankruptcy reform law was
never meant to supersede the Religious Liberty Act, and staffers are
reviewing Littlefield's decision to see if there was a defect in the
law that needs addressing before others are hurt.

In Utah, bankruptcy courts traditionally have been friendly toward
tithing, although trustees look to make sure that a debtor has
contributed to the church regularly in the past and is not using
tithing as a way to weasel out of payment. That is a reasonable
standard that balances conscience with the rights of creditors.

It remains to be seen what Littlefield's decision means in Utah. But
if creditors can demand that faith be dropped when it comes to debt
payment, then Congress may need to act to clarify the question. This
story appeared in The Daily Herald on page A6.