Can Charity Contributions Affect Bankruptcy Proceedings?

  • Bankruptcy

Can Charity Contributions Affect Bankruptcy Proceedings?

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Charity begins at home, and your home is where your heart lies. Many people believe in donating to causes which are dear to them. If the debts become too much, bankruptcy might be the only way out say Los Angeles based bankruptcy law firm However, there may be concerns about whether they will be able to continue making donations to their favorite charity, or whether previously made donations could affect their bankruptcy? This was taken care of by the amendment made by Congress in 2006. The Religious Liberty and Charitable Donation Clarification Act has been added to the U.S. Bankruptcy Code which has different implications in personal bankruptcy chapters.

Chapter 7

As long as there is an established history of donations, with the amount being reasonable compared to monthly gross income, it won’t be an issue as per the Religious Liberty and Charitable Donation Clarification Act, when it comes to Chapter 7 bankruptcy. in fact, they might assist you in qualifying for Chapter 7 bankruptcy. the means test, which is a parameter to calculate whether you have enough disposable income to pay for the Chapter 13 repayment plan, allows for certain monthly deductions from gross income. Regular charitable donations are deductions which are allowed and as a result of it, you could qualify for Chapter 7 bankruptcy.

Chapter 13

If you can prove that the monthly charitable donations are a regular routine, they can be included in your monthly expenses. Essentially, it means that you can continue to make those donations even during bankruptcy.

However, it should be kept in mind that bankruptcy trustees are skeptical regarding abuse of Religious Liberty and Charitable Donation Clarification Act. Thus, you should have the paperwork essential to prove your charitable contributions were regular and continued over a long period of time before you even considered a bankruptcy filing. A letter of contribution from the organization is helpful in this case.

Another factor to keep in mind is that according to Religious Liberty and Charitable Donation Clarification Act, you can only donate 15% of your gross income to charitable organizations. If you make donations which are more than the mentioned amount, the court might be forced to turn them over. In case you are worried about your donations to a religious organization while in the middle of or contemplating bankruptcy, you need to consult with experienced bankruptcy attorneys at 888-297-6023 and discuss your case.