Debt, Tithing, and Bankruptcy

I recently ran into an interesting column called "The Color of Money" by Michelle Singletary. I don't know too much about her regular column or subject matter, but I plan to make it a regular read after seeing her website and her recent column.

In her recent column titled "Bankruptcy Law Says Thou Shalt Not Tithe," she writes about the new bankruptcy laws that went into effect last year, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Unfortunately, my knowledge of bankruptcy law is dated, approximately 10 years. So, I will have to rely on the article, which appears to give a good summary.

According to the new laws, those who file for bankruptcy declare bankruptcy after a "means test." Those with lower annual incomes, as defined by their state's median income, are permitted to file for Chapter 7 bankruptcy, which excuses most non-secured debt. Those with higher incomes, based on the "means test," must file for bankruptcy under Chapter 13. Chapter 13 bankruptcy requires debtors to repay their debts over a 3-5 year period. They are allowed "reasonable" expenses, and are expected to use what is left to repay creditors. In short, under the old bankruptcy laws and the Religious Liberty and Charitable Donation Protection Act of 1998, court judges were required to permit debtors to tithe up to 15% of their annual income, thereby including charity as a "reasonable expense."

However, these new bankruptcy laws are the source of much controversy. In 2005, the law changed and judges are no longer required to allow debtors to tithe. In fact, in a NY case, U.S. Bankruptcy Judge Robert Littlefield Jr., ruled that a couple who gave $100 weekly to their church, had to use that money to pay their creditors. The judge wrote in his decision that the laws treat debtors differently , making charitable giving easier for some and not others (I believe he is alluding to the fact that those who file under Chapter 7 can still give charitably) and that "whether tithing is or is not reasonable is up to Washington to decide. However, consistency and logic would demand the same treatment of all debtors."

The change in law has been criticized by politicians on both sides of the isle (Both Orrin Hatch, R-Utah, and Barack Obama, D-Ill, are putting forth legislation that would allow those declaring bankruptcy to continue to give to their charities) for interfering with religious freedom and for discouraging charitable giving. The National Association of Consumer Bankruptcy Attorneys president, Mr. Sommer, states, "For religious Americans who find themselves deeply in debt due to job loss, catastrophic medical expenses or other circumstances [Sephardi Lady's question: might he be alluding to pure fiscal irresponsibility?], the 2005 reform legislation didn't just reward the federal bankruptcy code, it also effectively rewrote Exodus and Deuteronomy. Many who practice their faith and believe that they are bound by creed to tithe a portion of their income will find that Congress effectively decided that what credit cards want is more important than the deeply personal religious practices of Americans."

The column writer, Michelle Singletary, seems to take the position that charitable giving is reasonable for debtors, stating "Is tithing or charitable giving reasonable if you are in debt? For many it is. It's not a matter of choice. It's a matter of faith." But, she closes with a warning form the Torah, Psalms/Tehillim 37:21, "The wicked borrows and does not repay," and writes, "Just as you are called to render your tithes or charitable contributions, so too should you make every reasonable attempt to honor your debts."

As for me, I'm conflicted. I certainly wouldn't want to shut a fellow American out of religious life, and being unable to give, is like showing a religious person the exit door to religious life. On the other hand, creditors of all types should be paid, especially when their services/goods were enjoyed by the debtor. To allow high levels of giving, while the small businessman (or even big businessman), takes a back seat while a debtor puts other, seemingly optional expenses, before his, just doesn't seem reasonable either. Personally, I'd hate to be that small businessman (or woman) who extended credit on good faith, only to be left waiting in the cold, while this organization and that organization get paid before me.

And now for the Orthonomics. . . . . . .

Calling all Rabbis, Lawyers, Accountants, Community Activists, and you the reader to weigh in:

1. What does halacha have to say about the interplay between debt and ma'aser/tzedakah? I know plenty of frum people who are deeply in debt (tuition payers and not-yet-tuition payers) who continue to give generously. L'maaseh, does a person's requirements for ma'aser change if they find themselves in deep debt? How are different types of debts treated when it comes to changing giving patterns, assuming they change?

2. What does halacha have to say about the priority of bill paying? Who comes first, who follows, and who ends up in last place? For laborers, We know that halacha places "day laborers" (and I would assume other employees) as a first priority. But, what about for those that provide other services or consumer goods?

3. How have (or how will) these new bankruptcy laws affect the Orthodox community at large, or members of the Orthodox community individually? I don't know how many people in the community file for bankruptcy, but imagine that it doesn't differ significantly from the rest of American society. A friend of mine who is a financial planner believes that the debt of the younger generation combined with these new laws will have an effect.

4. And, how have (or how will) these new bankruptcy laws, affect Yeshivot and Day School? Are members allowed to pay for private, parochial schools under the new laws, or is it at the discretion of the courts. I recall reading that this expense is allowed, but only in a "token" amount, and we all know that frum schools don't cost a token amount. Are there schools out there dealing with keeping students enrolled despite bankruptcy? And what is the impact on tuition for other students?

5. What should the Orthodox community be doing, if anything, to help its members avoid falling into debt in the first place, or deeper into debt?

That is it for now. My brain is starting to wake up after our recent simcha. But, if this post is not a good one, please excuse it and ask your own questions.