Quiz #66 (Can donations to a church be voided as a constructively fraudulent conveyance?)

Are you getting tired of Religion Law Quizzes and bankruptcy?  If so, I apologize.  This will be the last one for a while.  Knowing the answer to this one is important if the U.S. economy slides into a recession and if charitable donations decrease in the recession (as has historically happened in the past).  So, with that in mind, let's see how you do on today's quiz (which has a surprising twist). 

 

A constructively fraudulent conveyance happens when a debtor is insolvent and transfers an asset to another entity without receiving reasonably equivalent value in return.  A husband and wife transfer approximately 12% of their gross income to their church (10% as tithing and an additional 2% for other charitable contributions).  The husband and wife then file for Chapter 13 bankruptcy.  Can the church be sued for recovery of a constructively fraudulent conveyance? 

 

(Scroll down for the answer)

 

Answer:  No and Yes.  This is a bit of a trick question.  Under federal bankruptcy law the answer is "no" as such a transfer is not considered a constructively fraudulent conveyance under 11 U.S.C. § 548(a)(1)(B)(2).  However, both Kansas and Missouri (along with many other states in the country) have adopted the Uniform Fraudulent Transfer Act ("UFTA") and the Kansas and Missouri versions of UFTA do not carve out a charitable donation exception.  See K.S.A. §§ 33-201 et seq. and Mo. Rev. Stat. §§ 428.005 et. seq. 

 

 

Disclaimer: The Religion Law Quizzes are provided as a service to you. They are intended only for educational purposes. Nothing in the Quizzes is intended to be legal advice and they should not be relied upon as conclusive on any issue discussed therein.