Appealed from the United States Court of Appeals for the Tenth Circuit (Nov. 8, 2008)
Oral argument: Mar. 22, 2010
BANKRUPTCY, CHAPTER 13, BAPCPA
This case concerns the extent of a bankruptcy court's flexibility in determining the "projected disposable income" of a debtor under 11 U.S.C. § 1325(b)(1)(B). Stephanie Kay Lanning filed for bankruptcy in October 2006 and proposed monthly payments of $144, based on her current income and expenses. Jan Hamilton, Lanning's bankruptcy trustee, objected and said that Lanning's "projected disposable income" was actually over $1,000 per month. The U.S. Bankruptcy Court for the District of Kansas overruled the objection and approved Lanning's plan. The court found that, while Hamilton's calculation of "projected disposable income" based on Lanning's income from the prior six months was correct under Form 22C, the results were inequitable because Lanning's income was artificially inflated for two months because of a buyout from her prior employer. The Bankruptcy Appeals Panel and the Tenth Circuit Court of Appeals both affirmed. Hamilton argues that the plain language of the statute mandates his “mechanical” approach, while Lanning argues that her "forward-looking" approach avoids absurd results. The Supreme Court's decision in this case will provide clarity to a statutory term that has flummoxed the lower courts, while simultaneously affecting the flexibility of bankruptcy judges.