Sections 707(b)(2) and 1325(b) of The Bankruptcy Code provide that debtors in bankruptcy may list tithing and other charitable contributions as a deduction when determining eligibility to file Chapter 7 bankruptcy and when calculating a Chapter 13 plan payment. Not all charitable contributions can be treated as a valid deduction. Charitable contributions must be paid to a qualified religious or charitable entity or organization as described in sections 170(c)(1) & (2) of the Internal Revenue Code of 1986. The Bankruptcy Code limits a deduction for charitable contributions to 15% of the debtor’s gross income.
The courts take a forward-looking approach when determining whether charitable contributions should be allowed as a deduction. What this means is that a debtor does not have to prove that they paid tithing in the past in order to receive a deduction for future contributions. However, debtors would be wise to actually make the contributions allowed for in their budget if they choose to take the deduction in their schedules and statements. Trustees may request copies of bank statements for the period following the filing of the case to make sure that the charitable contributions are being made.
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