Bankruptcy and Donating to Charity

April 5, 2017

Bankruptcy and donating to charity are not entirely incompatible with each other. Donating to charity is a respected and considered desirable by the government.  Therefore, donating to charity is allowed to a certain extent within the framework of bankruptcy.  However, there are some limitations.

Regular charitable donations

Charitable donations that have occurred regularly in the past are generally allowed to continue during the Chapter 7 or Chapter 13 bankruptcy process.  As long as these regular, ongoing donations are reasonable in amount, the bankruptcy court will usually have no problem with them.   The court generally does not want to see ongoing charitable donations that exceed 15% of the bankruptcy filer’s income.   Therefore, if you have regularly given to a church or other charitable organization in the past, you may be able to continue to do so during the bankruptcy process.   Still, it is vital to seek legal advice with a bankruptcy attorney in such matters.

Out-Of-Ordinary or Large Donations

Any large or out-of-ordinary donation to charity before or during bankruptcy will be placed under heavy scrutiny in the bankruptcy court.  Generally, any large gift given away before or during the bankruptcy process will be heavily scrutinized by the trustee in bankruptcy court.  This is because the court may interpret your large gift as an attempt to deny proper payment to your creditors.  

Even a gift to charity can be considered a fraudulent transaction if the circumstances appear that you are attempting to defraud your creditors by simply giving the money away.  Although the bankruptcy court esteems donation to charity in high regard, the court will come down harshly on any attempt to dispose of assets that could have otherwise been used to repay debts.  The court considers such improper donations.  The court may consider actions against you such demanding the repayment of the money or denying your discharge in the bankruptcy case.

Talk to a Bankruptcy Attorney About Donating To Charity 

If you want to make charitable donations and are considering bankruptcy, you need to speak to a bankruptcy attorney as soon as possible.  Seeking general information about donations and bankruptcy is limited.  If you are considering filing for bankruptcy, you need to set up a consultation with a bankruptcy attorney.

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