Reasonably Necessary

If you think that our bankruptcy laws are tough, be thankful you aren’t living in ancient Rome. The Roman law of the Twelve Tables (which dates back to the fifth century B.C.) provided that if a “debtor be insolvent to serve creditors,” his body should “be cut in pieces on the third market day.” Or, if his debtors were feeling merciful, he could “be sold to foreigners beyond the Tiber.” Well, while our bankruptcy laws are infinitely more humane, they can still produce unwarranted results. Earlier this year, a New York couple filed for bankruptcy. Under the 2005 bankruptcy “reforms” so-called, people at this couple’s income level are required to come up with a court-approved plan to partly repay their creditors. As part of the requirement, the couple listed their monthly expenses to determine how much they could afford to pay their creditors. Among the expenses listed was $100 a month the couple tithed to their church. When the bankruptcy trustee objected that this wasn’t the kind of “reasonably necessary” expense the most recent “reforms” intended, the issue went before a federal bankruptcy judge. In his ruling, Judge Robert Littlefield wrote that the 2005 “reforms” “effectively closed the door for debtors” like the New York couple from making charitable contributions. By “closing the door” the judge was referring to the ironic fact that prior to the 2005 “reforms,” regular contributions to churches and charities were specifically permitted under bankruptcy law. It was the so-called “reforms” of 2005 that created what Littlefield called an “awkward, bifurcated Congressional framework which makes charitable giving easier for some debtors and not others.” Littlefield all but called on Congress to amend the law. And that’s exactly what Senators Barack Obama (D-Ill.), who opposed the 2005 “reforms,” and Orrin Hatch (R-Utah), who voted for them, have proposed. Their legislation, which passed the Senate before the Senate adjourned, would allow everyone in bankruptcy to continue regularly giving to churches and charities, just as they had before. As Obama said in his statement, “For millions of Americans, charitable giving and tithing is an essential part of their lives . . . ” He added that “in a country where 37 million citizens live in poverty, we should be encouraging charitable giving, not limiting it.” I could not agree more. Most of the people declaring bankruptcy are not doing so because they put a plasma television in every room or otherwise splurged. Half of them are there because of catastrophic medical expenses. Another forty percent filed after losing their jobs, their marriages, or both. They aren’t trying to cheat their creditors. I also agree with Michelle Singletary, the Washington Post’s personal finance columnist. Singletary, whose faith is regularly on display in her column, wrote that just as giving is a biblical requirement, so is “[making] every reasonable attempt to honor your debts.” So let’s let our congressmen know about this and how we feel when Congress reconvenes in January. Allowing people to continue giving to others as they try to repay their creditors only promotes responsibility. It’s the kind of thing that is more than “reasonably necessary”—it is essential.  

For Further Reading and Information

Please donate online today with a year-end gift to help BreakPoint continue strong into the new year! Michelle Singletary, “Bankruptcy Law Says Thou Shalt Not Tithe,” Washington Post, 19 November 2006, F01. “Court: Credit Card Companies Put Ahead of Church Tithing by Controversial 2005 Bankruptcy Reform Law,” NACBA press release, 7 September 2006. Jason Spitalnick, post on bankruptcy law, Talking Points Memo blog, 20 April 2005. “Health Care Costs Main Cause of Personal Bankruptcy, Study Finds,” NewStandard, 4 February 2005. Josh Fischman, “Medical Bills Lead to Personal Bankruptcy,” U.S. News and World Report, 2 February 2005. David U. Himmelstein, et al., “MarketWatch: Illness and Injury as Contributors to Bankruptcy,” Health Affairs, 2 February 2005. BreakPoint Commentary No. 940615, “When Caesar Wants Your Tithe: The Greed of Government.”

12/19/06