Redwood City Bankruptcy Attorney Discusses Tithing Debate Asks Question Of Whether Chapter 13 Bankruptcy Protection Should Make Room For Religious Donations
Redwood City Bankruptcy Attorney Discusses Tithing Debate Asks Question Of Whether Chapter 13 Bankruptcy Protection Should Make Room For Religious Donations
A recent bill passed in the U.S. Senate earlier this fall protects a debtor’s right to tithe to a religious organization, even while this person is under bankruptcy protection. The bill was drafted by Senator Orrin Hatch and Senator Barrack Obama, after New York Bankruptcy Judge Littlefield’s ruling in August that a couple under Chapter 13 bankruptcy could not continue paying their parish $100 a month while they were under this protection before repaying creditors.
Since October 2005, debtors filing for bankruptcy have had to first undergo a means test, and if their annual incomes were above their state’s median income, they could only file for Chapter 13 protection (and repay their debts over a period of time) instead of Chapter 7 (which wipes out most of their debts).
Under a Chapter 13 filing, only certain reasonable expenses are allowed. Anything else must be used to repay creditors. Before the new bankruptcy law went into effect, and under the Religious Liberty and Charitable Donation Protection Act, debtors were allowed to exempt up to 15 percent of their annual income from creditors during Chapter 13 bankruptcy proceedings for tithing and charitable contributions.
The new bill must still be reviewed by the House of Representatives.
Chapter 13 Bankruptcy:
Chapter 13 is designed for individuals with regular income who want to pay their debts but are currently unable to do so. The purpose of chapter 13 is to enable financially distressed individual debtors, under court supervision and protection, to propose and carry out a repayment plan under which creditors are paid over an extended period of time. Under this chapter, debtors are permitted to repay creditors, in full or in part, in installments over a three-year period, during which time creditors are prohibited from starting or continuing collection efforts. A plan providing for payments over more than three years must be "for cause" and be approved by the court. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C. § 1322(d).
Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's unsecured debts are less than $290,525 and secured debts are less than $871,550.11 U.S.C. § 109(e). A corporation or partnership may not be a chapter 13 debtor. Id. An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e).
How Long Does It Take To Pay Off Debts Under Chapter 13 Protection? From Credit Infocenter
The size of your monthly plan payments is determined by the amount you can afford to pay after paying necessary living expenses (including insurance, mortgage payments, etc.).
Typically, the Plan payments last for 36 months, unless additional time is requested, but in no event will they last more than 60 months. Therefore, if your payment analysis shows, for example, that you can afford to pay $200.00 per month (above and beyond your normal living expenses), you would pay that each month to the Chapter 13 Trustee, who would disperse it pro rata among your creditors. At the end of 36 months, you are discharged from all dischargeable unsecured debts, regardless of how much your creditors have received.
In addition to your plan payments, you must stay current with any ongoing obligations you have to secured creditors, such as on your mortgage. Chapter 13 (or any Chapter of bankruptcy for that matter) only affects debts that you owe on or before you filed the bankruptcy. Therefore, on your mortgages and other secured debts, your Plan payment goes to pay any arrearages that existed on the date you file and you can repay that arrearage over the life of the Plan; but, you must stay current from the filing date forward with any mortgage payments, etc.
Secured debts (your mortgages) must be repaid in full, but Chapter 13 enables you to cure the defaults (reinstate the loans) over 36 months (or up to 60 months with creditor consent and court approval). You also have the ability to eliminate junior liens from your real property (your mortgages) under certain circumstances and restructure mortgage and other payments.
Sagaria Law P.C. represents clients in Chapter 7, Chapter 11, and Chapter 13 bankruptcy cases throughout Santa Clara County, Monterey County, and Alameda County. If you would like to speak to one of our bankruptcy attorneys, contact Sagaria Law, P.C. today to set up an appointment for your free consultation.
Law hampers Tithing By Debtors, Contra Costa Times.com, November 28, 2006
Bill Aims To Protect Post-Bankruptcy Tithing, Timesunion.com, October 23, 2006
Chapter 13 Bankruptcy, Credit Infocenter
Obama Bill to Protect Charitable and Religious Donations from Bankruptcy Passes Senate, Obama.senate.gov, October 2, 2006
Related Web Resource:
Chapter 13 Bankruptcy Basics, US Courts.gov
