United States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

Argued September 11, 2009

Decided June 21, 2010

Before

 WILLIAM J. BAUER, Circuit Judge

 ILANA DIAMOND ROVNER, Circuit Judge

 ANN CLAIRE WILLIAMS, Circuit Judge

No. 09-1212

In re RICHARD T. JOHNSON, et al., Appeal from the United States 

Debtors-Appellees. Bankruptcy Court for the Northern

 District of Illinois, Eastern Division

 

Appeal of: MARILYN O. MARSHALL, No. 08-B-12062

Trustee.

 Eugene R. Wedoff, Bankruptcy Judge.

ORDER

In the months before debtors Richard and Linda Johnson filed their Chapter 13

bankruptcy petition, their monthly income was temporarily elevated by workers

compensation payments that Mrs. Johnson was receiving. Because those payments had

ceased by the time the Johnsons filed their bankruptcy petition, the payment plan that the

Johnsons proposed did not recognize the workers compensation as ongoing income that

was available to satisfy their debts. Trustee Marilyn O. Marshall nonetheless objected to

the proposed plan, contending that the “projected disposable income” which 11 U.S.C.

§ 1325(b)(1)(B) compels the debtors to devote to repayment of their debts must be

calculated on the basis of the debtors’ average monthly income in the six months before

they filed their bankruptcy petition, regardless of changes in income that have occurred or

will occur after that six-month period. R. 24. The bankruptcy court overruled Marshall’s

NON-PRECEDENTIAL DECISION

To be cited only in accordance with 

Fed. R. App. P. 32.1
2 No. 09-1212

objection, In re Johnson, 400 B.R. 639 (Bankr. N.D. Ill. 2009), and confirmed the plan,

R. 59. Marshall appealed, the bankruptcy court certified the appeal as appropriate for

direct appeal to this court, R. 65-1, and we granted Marshall’s request to accept the

certification. See 28 U.S.C. § 158(d)(2)(B)(i). We held our decision in abeyance

pending the Supreme Court’s decision in Hamilton v. Lanning, 2010 WL 2243704 (U.S.

June 7, 2010), and now affirm on the basis of that decision.

When the Johnsons filed their Chapter 13 petition in May 2008, they were both

working; they reported a combined gross monthly income of $13,500 on their Schedule I

and on Schedule J indicated that they had $3,705 per month after payroll deductions and

payment of their actual expenses to devote to their Chapter 13 plan. The plan proposed

payments of $3,700 per month for a period of 60 months, for a total of $220,000. Of that

total, approximately $162,000 would be paid toward the $221,291 in allowed general

unsecured claims, meaning that the Johnsons’ general unsecured creditors would receive

roughly 73% of their claims. The rest of the payments would be devoted to secured and

priority creditors and to administrative expenses. 

As required by Fed. R. Bankr. P. 1007(b)(6) and their above-median income, the

Johnsons also completed Form 22C – “Chapter 13 Statement of Current Monthly Income

and Calculation of Commitment Period and Disposable Income” – and submitted it with

their proposed plan. That form calls for a statement of the average monthly income that a

debtor has received from all sources in the six calendar months before the debtor filed his

bankruptcy petition. During that six-month look-back period, Linda Johnson had been

receiving workers compensation payments for an injury to her hand. With the inclusion

of the workers compensation payments, the Johnsons reported an average gross monthly

income of $16,045 and disposable monthly income of $4,540 on Form 22C. Obviously,

those totals were higher than those reported on the Johnsons’ Schedules I and J.

However, Linda Johnson received the last of her workers compensation payments in

April 2008, the month before she and her husband filed their Chapter 13 petition.

Pursuant to section 1325(b)(1), the bankruptcy court may not approve a plan in

the face of an objection by the trustee or an unsecured creditor unless the plan requires

the debtor either to pay all allowed unsecured claims in full or to pay all of the “projected

disposable income” that he is to receive over the duration of the plan toward satisfaction

of the unsecured debts. Section 1325, as amended by the Bankruptcy Abuse Prevention

and Consumer Protection Act of 2005, 119 Stat. 23, (“BAPCPA”), does not indicate how

the debtor’s “projected disposable income” is to be ascertained, but it does define

“disposable income” to include the “current monthly income received by the debtor”

(excluding certain sources) “less amounts reasonably necessary to be expended” for the

maintenance and support of the debtor and his dependents, for certain charitable

contributions, and for business expenditures. § 1325(b)(2). The Code in turn defines

“current monthly income” to mean “the average monthly income from all sources that the

debtor receives (or in a joint case the debtor and the debtor’s spouse receive)” during the

six-month look-back period, which generally ends with the filing of the bankruptcy

petition. 11 U.S.C. § 101(10A)(A). This is the income reported on Form 22C.

Marshall objected to the Johnsons’ proposed plan on the ground that it did not

devote all of their projected disposable income, as defined by the Code, to repayment of
No. 09-1212 3

their unsecured debts. Because the Code defines “disposable income” to include the

debtor’s average monthly income from all sources during the six-month look-back

period, and the Johnsons’ monthly income during that period included Mrs. Johnson’s

workers compensation payments, it was the trustee’s position that the Johnsons were

compelled to include the amount of those payments in the income that they devoted to

satisfaction of their debts. In the trustee’s view, it was irrelevant that those payments had

ceased before the Johnsons filed their petition: the Code called for a mechanical

determination of projected disposable income that was essentially blind to whatever

changes in a debtor’s income that might occur after the six-month look-back period. 

The bankruptcy court, as we have noted, overruled the objection. The court

confronted a division of authority as to whether it could take into account changes in the

debtor’s income occurring after the look-back period in evaluating the sufficiency of the

proposed plan. Some courts followed the mechanical or conclusive approach advocated

by the trustee and exemplified by the Ninth Circuit’s decision in Maney v. Kagenveama

(In re Kagenveama), 541 F.3d 868, 872-75 (9th Cir. 2008). Others followed a

presumptive or forward-looking approach which treated the debtor’s average monthly

income during the six-month look-back period as a starting point in ascertaining the

debtor’s projected disposable income, but allowed for adjustments to that average based

on subsequent changes in income that had already occurred or were expected to occur.

See Hamilton v. Lanning (In re Lanning), 545 F.3d 1269, 1278-1282 (10th Cir. 2008);

Coop v. Frederickson (In re Frederickson), 545 F.3d 652, 658-661 (8th Cir. 2008), cert.

denied, 129 S. Ct. 1630 (2009). After considering the competing authorities, the

bankruptcy court adopted what it described as a “harmonizing” approach. 400 B.R. at

649-50. That approach was consistent with the forward-looking approach adopted by the

Eighth and the Tenth Circuits but eschewed any presumption that the average monthly

income during the look-back period is a correct measure of the debtor’s current monthly

income. The problem, as the court saw it, was a conflict between the backward-looking

definition of “current monthly income” set forth in section 101(10A) and the forwardlooking use of the same term in section 1325(b), which requires the payment of the

disposable income “projected . . . to be received” during the plan’s repayment period. Id.

at 649. Although that conflict was irreconcilable, in the court’s view, both provisions

could be given effect to some degree, and thereby harmonized, by employing the

inclusions and exclusions from “current monthly income” set forth in section 101(10A),

but applying them not in the retrospective manner specified by that provision but rather in

the forward-looking manner envisioned by section 1325(b). Id. The Johnsons had

prepared an amended Form 22C in response to the trustee’s objection which reflected the

monthly income they were receiving as of the date their Chapter 13 petition was filed

and, because the workers compensation payments had ceased prior to that date, excluded

those payments. In the court’s view, the amended Form 22C accurately reflected the

Johnson’s income in accord with the inclusions and exclusions specified by section

101(10A) and was also consistent with the income that the Johnsons would actually be

receiving over the duration of the plan. Id. at 651. Treating the current income reported

on the amended form as the Johnsons’ projected disposable income for purposes of

section 1325(b), the proposed plan was sufficient in that it devoted virtually all of that

income to repayment of the Johnsons’ debts. Id. On that basis, the court overruled

Marshall’s objection and confirmed the plan. Id.; R. 59.
4 No. 09-1212

After we heard arguments in this appeal, the Supreme Court granted certiorari to

review the Tenth Circuit’s decision in Lanning, and on June 7, the Court affirmed the

Tenth Circuit’s judgment. Specifically, the court held 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.” 2010 WL 2243704, at *12. In construing section 1325’s use of the term

“projected disposable income,” the court noted that “in ordinary usage future occurrences

are not ‘projected’ based on the assumption that the past will necessarily repeat itself”;

“[w]hile a projection takes past events into account, adjustments are often made based on

other factors that may affect the final outcome.” Id. at *6. Had Congress intended that a

debtor’s projected disposable income be determined mechanically, simply by multiplying

his average monthly income during the six-month look-back period by the number of

months in the proposed repayment plan, it likely would have used a term like “multiply”

rather than “projected.” Id. at *6-*7. The Court also noted that case law predating the

2005 BAPCPA amendments to the Code had recognized judicial discretion to account for

“known or virtually certain changes in the debtor’s income.” Id. at *7 (coll. cases). Had

Congress meant to overrule that well-established line of authority and import a new

meaning into the term “projected,” it “would have said so expressly.” Id. The court went

on to point out the variety of ways in which the mechanical approach was inconsistent

with the forward-looking terms of section 1325(b)(1)(B) and was likely to produce results

at odds with congressional intent. Id. at *8-*10. And although the trustee in Lanning had

suggested a number of “maneuvers” by which a debtor might seek to avoid or ameliorate

the potentially “harsh” results of the mechanical approach, id. at *10, the Court found

none of them satisfactory. Id. at *10-*11.

The Court’s decision in Lanning dictates that we affirm the bankruptcy court’s

judgment in this case. Lanning leaves no doubt that a bankruptcy court has the

discretion, in calculating the debtor’s projected disposable income based on the sixmonth look-back period, to account for changes in the debtor’s income that either have

occurred by the time the plan is confirmed or are virtually certain to occur. Id. at *12.

Here, by the time the Johnsons filed their Chapter 13 petition, the workers compensation

payments which were included on their original Form 22C and reflected in the monthly

income that the Johnsons received during the six-month period preceding the bankruptcy

had already ceased. Consequently, those payments would no longer be a part of the

Johnsons’ income nor available to fund the plan’s proposed payments to their creditors

once the plan was confirmed and implemented. Recognizing that reality, the bankruptcy

court appropriately excluded the workers compensation payments from the Johnson’s

projected disposable income, and as the proposed plan otherwise committed virtually all

of their projected disposable income to the repayment of their debts, confirmed the plan.

For these reasons, we AFFIRM the bankruptcy court’s judgment.