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08-998 HAMILTON V. LANNING DECISION BELOW: 545 F.3d 1269 LIMITED TO THE FOLLOWING QUESTION: WHETHER, IN CALCULATING THE DEBTOR'S "PROJECTED DISPOSABLE INCOME" DURING THE PLAN PERIOD, THE BANKRUPTCY COURT MAY CONSIDER EVIDENCE SUGGESTING THAT THE DEBTOR'S INCOME OR EXPENSES DURING THAT PERIOD ARE LIKELY TO BE DIFFERENT FROM HER INCOME OR EXPENSES DURING THE PRE-FILING PERIOD. CERT. GRANTED 11/2/2009 QUESTION PRESENTED: Did the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 eliminate judicial discretion by requiring an above-median income debtor to pay to unsecured creditors the net result reported on Official Form 22C? LOWER COURT CASE NUMBER: 08-3009
In the case of Jan Hamilton, Chapter 13 Trustee v. Stephanie Kay Lanning (2009), the U.S. Supreme Court was asked to determine how a bankruptcy court should calculate a debtor's projected disposable income. The dispute arose when Lanning filed for Chapter 13 bankruptcy and proposed a repayment plan based on her current monthly income, which had significantly decreased compared to the previous six months due to job loss. However, Hamilton argued that according to Bankruptcy Code’s “means test”, her projected disposable income should be calculated based on an average of her earnings over the six-month period before she declared bankruptcy - which would result in higher payments. The Supreme Court ruled in favor of Lanning with Justice Alito writing for majority stating that while courts may begin by looking at debtor's prior six month's earnings as starting point for determining projected disposable income, they can also take into account other relevant factors such as changes in debtor’s earning capacity or expenses expected during plan period if there is substantial evidence these changes are likely. This ruling clarified ambiguity around interpretation of "projected" in context of calculating future ability pay under Chapter 13 plans and provided more flexibility for debtors facing significant financial hardship.
In the case of Jan Hamilton, Chapter 13 Trustee v. Stephanie Kay Lanning (2009), Justice Scalia dissented from the majority opinion. He argued that in determining a debtor's projected disposable income during bankruptcy proceedings, courts should strictly adhere to the statutory formula provided by Congress rather than making speculative adjustments based on potential changes in the debtor's financial circumstances. According to Scalia, this approach would ensure consistency and fairness across cases while avoiding unnecessary judicial discretion and speculation about future events. He criticized the majority for adopting an overly flexible interpretation of "projected" disposable income that could lead to arbitrary results depending on individual judges' predictions about future income and expenses.