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Disposable Income Calculation Issue in Bankruptcy Matters

By FindLaw Staff on June 07, 2010 | Last updated on March 21, 2019

Hamilton v. Lanning, No. 08-998, concerned an objection by a Chapter 13 bankruptcy trustee to confirmation of debtor's plan because the proposed payment amount was less than the full amount of the claims against debtor, and because she had not committed all of her "projected disposable income" to repaying creditors.  The Supreme Court affirmed the Tenth Circuit's affirmance of the bankruptcy court's rejection of the objection, holding that, when a bankruptcy court calculates a debtor's projected disposable income, the court may account for changes in the debtor's income or expenses that are known or virtually certain at the time of confirmation.

As the Court wrote: "Chapter 13 of the Bankruptcy Code provides bankruptcy protection to "individual[s] with regular income" whose debts fall within statutory limits. 11 U. S. C. §§ 101(30), 109(e). Unlike debtors who file under Chapter 7 and must liquidate their nonexempt assets in order to pay creditors, see §§704(a)(1), 726, Chapter 13 debtors are permitted to keep their property, but they must agree to a court approved plan under which they pay creditors out of their future income, see §§1306(b), 1321, 1322(a)(1), 1328(a). A bankruptcy trustee oversees the filing and execution of a Chapter 13 debtor's plan. §1322(a)(1); see also 28 U. S. C. §586(a)(3)."

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