Is the Almighty Entitled to the Almighty Dollar of the Bankrupt? Free Exercise Issues in the Bankruptcy Code

Abstract

This paper will discuss the relationship between the Free Exercise Clause of the First Amendment and the Bankruptcy Code. There are several intersections of these seemingly distinct paths. This paper will address three of these crossroads as it pertains to what many religions find as a duty of its followers: tithing. Before addressing the bankruptcy issues, this paper will discuss the current application of the Free Exercise Clause and the application of Religious Freedom Restoration Act (“RFRA”). This paper will then introduce the areas in which the Bankruptcy Code and Free Exercise Clause intersect. In application of the Free Exercise Clause to the Bankruptcy Code, the first issue that will be addressed is fraudulent conveyance law both under the Bankruptcy Code and state law. Fraudulent transfer law, under state law and the Bankruptcy Code, allows creditors or trustees in bankruptcy to avoid any actual or constructive fraudulent transfer made by the debtor. Next, this paper will address the implications of a debtor’s Chapter 13 plan that requires the debtor to pay all of its “disposable income” to creditors and whether a debtor’s tithes should be excluded from this calculation. Finally, the issue of “charitable donations” allowed for in the means test will be addressed, and how these contributions may decrease the “current monthly income” of an individual allowing them access to Chapter 7 relief that would have been denied before these contributions were included in that calculation.