Hamilton, Chapter 13 Trustee v. Lanning

The U.S. Supreme Court held today that in calculating a debtor's "projected disposable income," a bankruptcy court may consider evidence suggesting that the debtor's income or expenses will differ from her prior income or expenses.

In 2006, Stephanie Kay Lanning filed for bankruptcy, proposing monthly payments of $144, based on her current income and expenses. Jan Hamilton, Lanning's bankruptcy trustee, countered that Lanning's "projected disposable income" was more than $1,000 per month

The U.S. Bankruptcy Court for the District of Kansas denied Hamilton's objections. The Bankruptcy Appellate Panel of the Tenth Circuit affirmed, and on appeal, the 10th U.S. Circuit Court of Appeals also affirmed, holding that the starting point for calculating a Chapter 13 debtor's "projected disposable income" is presumed to be the debtor's current monthly income. However, the court noted that the calculation is subject to a showing that there is a substantial change in circumstances. The court remanded the case to the bankruptcy court to determine whether the debtor had shown there was a substantial change in her circumstances.

On June 7, 2010, the U.S. Supreme Court affirmed in an 8-1 decision by Justice Samuel Alito.

"In light of this historical practice, we would expect that, had Congress intended for 'projected' to carry a specialized -- and indeed, unusual -- meaning in Chapter 13, Congress would have said so expressly," Alito wrote for the majority.

Justice Antonin Scalia dissented, arguing: "It would be pointless to define disposable income in such detail, based on data during a specific 6-month period, if a court were free to set the resulting figure aside whenever it appears to be a poor predictor."

Question presented: In calculating a debtor's "projected disposable income," may the bankruptcy court consider evidence suggesting that the debtor's income or expenses during that period are likely to be different from the debtor's income or expenses during the pre-filing period?