Sunday, December 17, 2006

Bankruptcy Court Invites Free Exercise Challenge To Nearly-Repealed Chapter 13 Provision

Shortly before Congress passed an amendment to the Bankruptcy Act that would change the court's result, a New Mexico Bankruptcy Court refused to confirm a Chapter 13 plan that allowed over-median income debtors to deduct charitable contributions as a reasonably necessary expense. However the court gave the debtors 45 days to show that Congress infringed their free exercise of religion by distinguishing between above- and below-median income debtors in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. In the case, In re Meyer, 2006 Bankr. LEXIS 3383 (D NM Bankr., Dec. 4, 2006), the United States Trustee supported the debtors who were attempting to protect their ability to continue to make charitable contributions before obligations to other creditors were satisfied. The statutory change to Chapter 13 that will protect charitable contributions is awaiting the President's signature.