On Monday, March 22, 2010, the United States Supreme Court heard oral arguments related to the Hamilton v. Lanning Bankruptcy Case. In October 2006, Stephanie Kay Lanning filed for bankruptcy suggesting a monthly payment plan of $144, based on her current income and expenses. Jan Hamilton, Lanning’s bankruptcy trustee, objected to her proposal, saying that Lanning’s “projected disposable income” exceeded $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 the decision. Hamilton argues that the plain language of the statute mandates his “mechanical” approach, while Lanning argues that her “forward-looking” approach avoids unreasonable 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. This case addresses 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).  The question that the U.S. Supreme Court will decide is whether bankruptcy courts in determining the amount a debtor must pay to creditors may consider changes in the debtor’s income and expenses after the pre-filing period.

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