Hamilton v. Lanning Supreme Court Decision And Disposable Income In Chapter 13 Bankruptcy – The Forward Looking Approach Is Correct

In the recent decision in Hamilton v. Lanning, the United States Supreme Court decided to use a forward looking approach and upheld the appellate court’s decision that, when a bankruptcy court calculates a debtor’s projected disposable income for purposes of determining the payment plan requirements, the court may account for changes in the debtor’s income or expenses that are known or virtually certain at the time of confirmation. This may now help debtors whose income was either much higher or lower during the 6 months prior to filing a case. Before this decision, many debtors with high prefiling income would simply wait it out if they could before filing, so that their prefiling income would match their postfiling income.

The majority opinion was obviously correct. Any other decision would have left debtors whose income had just been reduced (but still had sufficient funds for a plan) to have to pay into the plan income that the debtor was no longer earning.