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Obama Bill to Protect Charitable and Religious Donations from Bankruptcy Passes Senate

Location: Washington, DC

Obama Bill to Protect Charitable and Religious Donations from Bankruptcy Passes Senate

U.S. Senator Barack Obama (D-IL) today said that legislation he introduced with Senator Orrin Hatch (R-UT) that would allow individuals in bankruptcy to continue giving to churches and charities has passed the Senate. The legislation is expected to pass the House when Congress returns in November.

"For millions of Americans, charitable giving and tithing is an essential part of their lives," Obama said. "And in a country where 37 million citizens live in poverty, we should be encouraging charitable giving, not limiting it. This bill will clarify that the Bankruptcy bill passed by Congress last year - a bill I voted against - did not change the law to prioritize creditors over religious institutions and charities."

In June 1998, President Clinton signed into law the Religious Liberty and Charitable Donation Protection Act. Under the law, individuals were allowed to exempt up to 15 percent of their annual income from creditors during Chapter 13 bankruptcy proceedings for tithing and charitable contributions. The bill passed Congress unanimously and President Clinton said at the bill signing that, "It is a great loss to all of our citizens for creditors to recoup their losses in bankruptcy cases from donations made in good faith by our citizens to their churches and charitable institutions."

Unfortunately, this law has been undone by poorly crafted provisions in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Last month, a federal bankruptcy judge ruled that the 2005 bankruptcy bill prevents individuals in bankruptcy who have incomes above the median income from giving to charity or tithing.

Obama and Hatch's legislation will correct provisions in the bankruptcy bill that threaten to limit the ability of individuals in bankruptcy to give to charity or their church.

The legislation is supported by a wide array of charitable and religious institutions, including the United Way, the American Red Cross, the National Council of Churches, the National Baptist Convention USA, the National Baptist Convention of America, NETWORK, the Interfaith Alliance, the United Church of Christ, and the African Methodist Episcopal Church.

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