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Giving money to your church or favorite charity on a regular basis is a worthwhile expense. People typically tithe up to 10% of their income to their church. Charities generally do not set an amount to give. The courts view tithing and charitable giving in a positive light, but they want you to do so responsibly. Depending on the type of bankruptcy you are considering (Chapter 7 or Chapter 13), you should be able to resume your donations with the assistance of your lawyer.
Can I Continue My Tithe Offering to My Church if I file for Chapter 7 Bankruptcy?
Chapter 7 is a liquidation bankruptcy. Your assets are sold to pay down your debt. You must list all monthly living and personal expenses. List your tithe amount among these costs. Your bankruptcy Trustee reviews this list and makes a determination on whether the expense is reasonable. One of a Chapter 7 trustee’s jobs is to see if you have any funds available to repay some of your creditors in a Chapter 13 bankruptcy. Your attorney can help you understand what expenses, including charitable donations, will be considered reasonable in your district.
Can Donating to a Church or Charity Help Me Qualify for Chapter 7?
To file for a Chapter 7 bankruptcy, you must qualify under an income based test called the means test. Based on your household size and income, the means test determines if your income is low enough to participate in Chapter 7. You can reduce the amount of your income by continuing to donate to your church or charity. Deductions for tithes are allowed and may help you qualify for a Chapter 7 case. It is best to have a history of giving to an organization. You cannot suddenly increase your donations to other groups to qualify for the means test. Again, the court and trustee can scrutinize these deductions for reasonableness. The bankruptcy court expects you are giving these donations in good faith. They can file a motion to dismiss your case if they feel you are not truthful about the contributions.
Am I Legally Responsible for My Tithe If I Signed a Pledge Card?
Even though the Church may ask you to sign a tithe card, it is not a legally binding document. The Church is aware that financial hardships arise. They do not want to put a further burden on you. Speak with your lawyer and let them know your desire to continue your ongoing commitment.
Is a Charitable Donation a Necessary Expense During Chapter 13 Bankruptcy?
If you have been giving a monthly or yearly donation to a favorite charity and you want to continue, list it on your Chapter 13 budget. You, with advice from your attorney, are the one who prepares the proposal to cover your living expenses and the debt you need to repay. Work with your bankruptcy professional to determine if continuing your donation is feasible. If you are able to maintain it to regain your financial footing, it will be fine to take a break from your contributions. The bankruptcy court must ultimately your plan.
Are My Donations Tax Deductible?
Yes, your contribution is a tax deduction. It is a good idea to keep detailed records of your giving during your bankruptcy. You should also find documentation of past donations to your church or charity to help avoid any questions about your charitable giving during bankruptcy.
Sawin & Shea – Indianapolis Bankruptcy Attorneys
Bankruptcy is not meant to stop your life or alter your charitable nature. Let the Indiana bankruptcy attorneys at Sawin & Shea help you continue to give to your church or favorite charity during your bankruptcy case. We are here for you during this life-changing process. Please do not hesitate to call us today at 317-759-1483 or send an email for a free consultation. We are ready to help.