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| September 15th, 2006 |
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Media Contact(s): Peter Carr (202) 224-9854,
Jared Whitley (202) 224-0134 |
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Printable Version |
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SENATORS: TITHING ALLOWED DURING BANKRUPTCY, COURT DECISION WRONG
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WASHINGTON – Senators Chuck Grassley, Orrin Hatch and Jeff Sessions today questioned a court decision made in a New York bankruptcy case. The Senators said in a letter to Attorney General Alberto Gonzales that the decision “inaccurately interprets how tithes are to be treated under the bankruptcy laws” and “runs counter to Congressional intent.”
In the case, In re Diagostino, the court found that above-median income debtors in Chapter 13 repayment plans cannot deduct charitable contributions when calculating their disposable income under the means test. The Senators cited a 1998 law authored by Grassley, Hatch and Sessions that protects tithing and charitable giving by individuals who are recovering from bankruptcy. Nothing in the comprehensive bankruptcy reform legislation that was signed into law last year was intended to change the right to allow such contributions in bankruptcy. The three Senators were also the lead sponsors of the 2005 bankruptcy law.
The New York case arose because a trustee objected to the inclusion of charitable contributions in a proposed Chapter 13 repayment plan. The Department of Justice has responsibility for Chapter 13 bankruptcy trustees. The Senators asked the Attorney General to file court papers in appropriate cases to correct this misinterpretation, as well as issue mandatory guidelines to the trustees so they do not object to reasonable charitable contributions in future cases.
The following is a copy of the letter from Grassley, Hatch and Sessions to Gonzales.
September 15, 2006
The Honorable Alberto Gonzales
United States Attorney General
United States Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
Dear Attorney General Gonzales:
We would like to bring to your attention a bankruptcy case recently decided in New York, In re Diagostino, No. 06-10384, 2006 WL 2578172 (Bankr. N.D.N.Y. Aug. 28, 2006), which we believe inaccurately interprets how tithes are to be treated under the bankruptcy laws. In Diagostino, the court ruled that above-median income debtors in Chapter 13 repayment plans cannot deduct charitable contributions when calculating their disposable income under the means test. This case arose because a trustee objected to the inclusion of tithing in a proposed repayment plan.
We believe that this court decision was wrongly decided and runs counter to Congressional intent behind the Religious Liberty and Charitable Donation Protection Act of 1998 (PL 105-183) and the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (PL 109-8). Because the Department of Justice has plenary authority over Chapter 13 trustees under Chapter 4 of the United States Trustee Manual, we ask that the Department of Justice specifically direct Chapter 13 trustees – the private parties who oversee repayment plans – not to object to the inclusion of reasonable charitable contributions in a repayment plan if the contribution at issue meets the requirements of Section 4 of PL 105-183.
For people of faith in America, the obligation to tithe presents a significant part of the free exercise of religion, which is guaranteed to all Americans under the First Amendment. In fact, Congress has acted to protect the exercise of religion from encroachment by bankruptcy courts and trustees. Congress enacted the Religious Liberty and Charitable Donation Protection Act of 1998 to specifically protect tithing in the context of bankruptcy law. Consequently, trustees may no longer demand that churches “refund” tithes to the bankruptcy courts. Similarly, debtors have a statutory right to include tithes in repayment plans under Section 4 of that law. In addition, nothing in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was intended to change this right to allow tithes in a bankruptcy repayment plan. As the lead sponsors of both these important bankruptcy statutes, we can assure you that Congress never intended to exclude reasonable tithing in bankruptcy repayment plans.
The Department of Justice has the power to remove this obstacle that has presented itself in this misguided interpretation of the bankruptcy laws. We urge the Department to file court papers in appropriate cases to correct this misinterpretation, as well as issue mandatory guidance to Chapter 13 trustees so that they not object to reasonable charitable contributions in Chapter 13 repayment plans.
Sincerely,
Chuck Grassley
Orrin Hatch
Jeff Sessions
cc: Acting Director Clifford J. White, III, Executive Office for U.S. Trustees
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