HAMILTON V. LANNING 560 U.S. 505 (2010) CASE BRIEF

HAMILTON, V. LANNING

560 U.S. 505 (2010)

NATURE OF THE CASE: This was an appeal of an affirmation by the Court of Appeals of a confirmation by the bankruptcy court of a Chapter 13 plan that considered Lanning's (D) actual income for “projected disposable income” (PDI) under 11 U.S.C.S. § 1325(b)(1)(B).

FACTS: D had $36,793.36 in unsecured debt. In the six months before her filing, she received a one-time buyout from her former employer. This payment greatly inflated her gross income. D's current monthly income, as averaged from April through October 2006, was $5,343.70-a figure that exceeds the median income for a family of one in Kansas. D's monthly expenses, calculated pursuant to § 707(b)(2), were $4,228.71. She reported a monthly “disposable income” of $1,114.98. D reported income from her new job of $1,922 per month-which is below the state median. D reported actual monthly expenses of $1,772.97. This resulted in monthly disposable income of $149.03. D filed a plan to pay $144 per month for 36 months. Hamilton (P), a private Chapter 13 trustee, objected. P wanted to disposable income by the number of months in the commitment period based on the 22C form where creditors would be paid in full if P made monthly payments of $756 for a period of 60 months. There is no dispute that D's actual income was insufficient to make payments in that amount. The Bankruptcy Court ruled at $144 but required a 60-month plan period. The Bankruptcy Court held it was necessary to avoid the absurd result of denying bankruptcy protection to individuals with deteriorating finances in the six months before filing. The BAP affirmed; although Congress redefined “disposable income” in 2005, it chose not to alter the pre-existing term “projected disposable income.” The panel concluded, there was no reason to believe that Congress intended to alter the pre-BAPCPA practice under which bankruptcy courts determined projected disposable income by reference to Schedules I and J but considered other evidence when there was reason to believe that the schedules did not reflect a debtor's actual ability to pay. The Tenth Circuit affirmed; a court, in calculating “projected disposable income,” should begin with the “presumption” that the figure yielded by the mechanical approach is correct, but the court concluded that this figure may be rebutted by evidence of a substantial change in the debtor's circumstances.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

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