VI. CHAPTER 13 CONSIDERATIONS: HAMILTON v. LANNING
In 2010, the Supreme Court resolved a split among the circuits concerning the proper application of the term "projected disposable monthly income" as that phrase is used in Section 1325(b)(1)(B). Prior to the decision, some courts adopted the mechanical approach, reasoning that the only function of the word "projected" in Section 1325(b)(1)(B) is to multiply the net "disposable monthly income" figure by the applicable commitment period. See Maney v. Kagenveama (In re Kagenveama), 541 F.3d 868 (9th Cir. 2008); In re Alexander, 344 B.R. 742 (Bankr. E.D.N.C. 2006); In re Barr, 341 B.R. 181 (Bankr. M.D.N.C. 2006).
Other courts followed the "forward-looking approach," finding that "projected disposable monthly income" must mean "the debtor's anticipated income during the term of the plan, not merely an average of her prepetition income." In re Hardacre, 338 B.R. 718, 722-23 (Bankr. N.D. Tex. 2006); see also Coop v. Frederickson (In re Frederickson), 545 F.3d 652 (8th Cir. 2008); Hildebrand v. Petro (In re Petro), 395 B.R. 369 (6th Cir. B.A.P. 2008); Kibbe v. Sumski (In re Kibbe), 361 B.R. 302 (1st Cir. B.A.P. 2007) (per curiam); In re Watson, 366 B.R. 523 (Bankr. D. Md. 2007); In re Pak, 357 B.R. 549 (Bankr. N.D. Cal. 2006), aff'd, 378 B.R. 257 (9th Cir. B.A.P. 2007) (abrogated by Maney v. Kagenveama (In re Kagenveama), 541 F.3d 868 (9th Cir. 2008)).
In Hamilton v. Lanning, the Supreme Court rejected the mechanical approach, holding that in "unusual cases," a court may take into account "known or virtually certain information about the debtor's future income or expenses," as of the effective date of the Chapter 13 plan. Hamilton v. Lanning, 560 U.S. 505 (2010). While the holding is limited to Chapter 13, the Supreme Court's decision continues to complicate Chapter 13 practice. The following section summarizes some of the decisions that have interpreted the Hamilton v. Lanning decision.
A. What Qualifies as a "Known or Virtually Certain" Change in Income/Expenses?
1. Change Found
See Seafort v. Burden (In re Seafort), 669 F.3d 662 (6th Cir. 2012) (post-petition income, available to debtors after 401(k) loans are fully repaid, is "projected disposable income" that must be turned over to the trustee for distribution to unsecured creditors under 11 U.S.C. § 1325(b)(1)(B) and may not be used to fund voluntary 401(k) plans); In re Johnson, 2010 WL 2594354, No. 09-1212 (7th Cir. June 21, 2010) (worker's compensation income which ceased within the CMI period should be excluded from projected disposable monthly income); Kramer v. Bankowski (In re Kramer), 505 B.R. 614 (B.A.P. 1st Cir. 2014) (debtors not permitted to claim deduction for mortgage they proposed to strip); In re Afko, 501 B.R. 202 (Bankr. S.D.N.Y. 2013) (where retirement loan repayment scheduled to end 24 months into Chapter 13 plan, debtors required to step up plan payments based on anticipated disposable monthly income); In re Moore, 446 B.R. 458, 462-63 (Bankr. D. Colo. 2011) (debtor permitted downward adjustment of projected disposable income to account for one-time $50,000 student loan payment received from the Army during the six months before the petition was filed; Form B 22C (omitting the one-time payment), not schedules I and J, used to calculate projected disposable monthly income); In re Wing, 435 B.R. 705...
