Bankruptcy Exemption Progresses

Bankruptcy Exemption Progresses

A bill that protects churches from creditors seeking to confiscate donations made by bankrupt contributors is making headway in Congress.

Recent court rulings have not protected churches from efforts by debt collectors who have successfully demanded church tithes given by individuals who had filed for bankruptcy.

Rep. Ron Packard (R-Calif.) says his bill, the Religious Freedom and Charitable Donation Protection Act, which would shield church tithes from bankruptcy proceedings, has strong support from both parties. "Most were shocked it was even an issue," says Packard, a Mormon. The Senate counterpart introduced by Iowa Republican Charles Grassley, a Baptist, would bar collection agencies from suing churches for donations and would allow bankrupt members to tithe during the repayment period (CT, Dec. 8, 1997, p. 76).

Although the bill has wide congressional support, bankruptcy lawyers are actively opposing its passage. "It would be different if, forgive the analogy, the church was selling salvation or offering a specific service for the money that was given to them," says Stephen Case of the National Bankruptcy Conference. "The church would treat a person the same if they didn't give them a dime."

The new legislation comes after the Supreme Court struck down the first civil test of the Religious Freedom Restoration Act (CT, Aug. 11, 1997, p. 48). Since then, there has been a surge in the number of suits against churches for contributions made by bankrupt donors. For example, attorneys for the Church of Jesus Christ of Latter-day Saints say collection agencies are seeking to recover church donations in about 100 cases.

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May 18, 1998

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