Many debtors considering bankruptcy are active members of their church, synagogue or mosque and committed to donating a certain amount of money to the organization. Filing for bankruptcy does not mean that a debtor's charitable contributions must stop. Debtors, who file for bankruptcy, are allowed to give to a charitable organization (including religious organizations) and can even include it as an expense on their budget during a Chapter 7 bankruptcy or Chapter 13 bankruptcy filing.
How It Works
Debtors are allowed to donate to a charitable organization during bankruptcy; but that donation amount cannot be more than 15 percent of the debtor's current yearly gross income. For example, if a debtor earned $30,000 a year, he/she would be allowed to donate a maximum of $4500 a year to the charity of his/her choice. Also, the debtor must let the bankruptcy trustee know how much that donation will be using the budget form. Oftentimes, for debtors who are just over the income limit allowed for Chapter 7 bankruptcy, including charitable donations as an expense can reduce their income just enough to qualify for Chapter 7 bankruptcy instead of Chapter 13 bankruptcy.
If you schedule charitable donations as an expense on your monthly budget, you must follow through with making those donations. You may be challenged by the bankruptcy court if it is later discovered that you scheduled $4500 a year in donations and later used that money to buy your child/parent/friend a vehicle or other item. Remember, it is important to not make any commitments that you may not be able to keep in the future. If you find that you are unable to follow through on a commitment made during your bankruptcy, please notify your bankruptcy attorney immediately.