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22
Sep
2021

Bankruptcy Charitable Contributions Disallowed

Here, the debtors proposed a Chapter 13 reorganization plan that included a $150.00 voluntary charitable payment to a church per month and another $30.95 per month for cable television.

Fort Eustis Federal Credit Union timely objected to the debtors’ payments above. However, the Bankruptcy Court confirmed the debtors’ plan over the credit union’s objections.

The credit union appealed the Bankruptcy Court’s confirmation of the plan, and the appellate court upheld the credit union’s objections. The appellate court ordered the debtors to increase their monthly payments to the bankruptcy trustee by $180.00. Payments to the church and for cable television were not approved.

Under a Chapter 13 plan, all of the debtors’ projected disposable income must be utilized to make payments under the plan. Disposable income is defined as:

[I]ncome which is received by the debtor and which is not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor.

In this case, the court found that if the church received $150.00 per month and the debtors only made a $300.00 per month payment to the trustee, the unsecured creditors would receive $14.00 per month while the church would receive the entire $150.00 payment.

This disparity in payments justified the appellate court in denying the charitable contribution (and cable TV payments). The court noted that a majority of courts have refused to approve high charitable donations.

This court found that the church contributions and cable television payments were unnecessary to maintain the support of the debtors. On a second appeal on this issue, the credit union again prevailed. Roynald Bungert, Sr. vs. Fort Eustis Federal Credit Union, U.S. Court of Appeals, 4th Cir., Case No. 90-2354.

Author: Charles R. Harroun, Attorney at Law



This entry was posted on Wednesday, September 22nd, 2021 at 8:59 am and is filed under Bankruptcy, National. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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