Donations to Church Prior to Filing Bankruptcy

In a test of the Religious Liberty and Charitable Donation Protection Act of 1998 (RLCDPA), a federal court in California ruled that contributions to a church made in the year preceding bankruptcy filing cannot be recovered by the bankruptcy trustee. The church was allowed to keep the donations. The RLCDPA prohibits bankruptcy courts from recovering contributions to religious organizations when the amount does not exceed 15% of the debtor’s gross income; or if more than 15%, the contributions were consistent with prior practice. The bankruptcy trustee tried to argue that the 15% applied to income after expenses (disposable income). The court disagreed and affirmed the 15% applied to gross income. In re Lewis 401 B.R. 431 (C.D. Cal. 2009)