Charitable giving is a way of life for most Americans. Per capita, we are more generous than any other nation.

But who are the most generous in our country?  Individuals or businesses? I thought for sure it would be large corporations because they have the most money. I was wrong.

Individuals are responsible for over 75% of all charitable giving. More surprising still is that the poor give a higher percentage of their income to charity than the rich.

Most of this charity involves donations, tithes and offerings for spiritual or religous purposes. Churches, synogogues and other houses of worship are the biggest recipients of these charitable gifts.

This leads to a frequently asked question by my clients looking to file bankruptcy in Rhode Island. Will RI bankruptcy law prevent a debtor from making charitable contributions?

Prior to 2006, the answer might have been yes. Bankruptcy courts across the country, and our Rhode Island Bankruptcy Court, were not allowing Chapter 13 debtors to make charitable donations.  Bankruptcy law essentially prevented charities from keeping gifts from debtors who were filing for bankruptcy relief.

Fortunately the law changed when Congress passed the Religious Liberty and Charitable Donation Clarification Act of 2006.  This new law permits a debtor to exercise his religious liberty by making charitable donations as long as there is no deliberate attempt to avoid creditors.

In Rhode Island, as elsewhere, you can file a Chapter 7 or Chapter 13 bankruptcy and deduct from your income that portion regularly and systematically given to charity. As long as you can provide proof that your charitable giving is legitimate, RI bankruptcy law will not interfere.

Bottom line: Like the Bible story of the poor widow who gave “out of her poverty”, a debtor filing bankruptcy in Rhode Island can also continue making honest charitable donations.