Source: http://www.law.cornell.edu/supremecourt/text/08-998/
Timestamp: 2013-12-04 20:40:06
Document Index: 259436626

Matched Legal Cases: ['§1325', '§1325', '§101', '§1325', '§707', '§1301', '§1325', '§1325', '§1325', '§1325', '§1325', '§1129', '§1325', '§707', '§101', '§704', '§1306', '§1322', '§586', '§1325', '§1325', '§1325', '§1325', '§1325', '§1325', '§164', '§35', '§1325', '§101', '§1325', '§1325', '§707', '§707']

HAMILTON v. LANNING | Supreme Court | LII / Legal Information Institute
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[HTML] [PDF] HAMILTON, CHAPTER 13 TRUSTEE v
. LANNING
No. 08998.Argued March 22, 2010Decided June 7, 2010
Debtors filing for protection under Chapter 13 of the Bankruptcy Code must agree to a court-approved plan under which they pay creditors out of their future income. If the bankruptcy trustee or an unsecured creditor objects, a bankruptcy court may not approve the plan unless it provides for the full repayment of unsecured claims or provides that all of the debtors projected disposable income to be received over the plans duration will be applied to make payments in accordance with plan terms. 11 U. S. C. §1325(b)(1). Before enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the Code loosely defined disposable income. Though it did not define projected disposable income, most bankruptcy courts calculated it using a mechanical approach, multiplying monthly income by the number of months in the plan and then determining the disposable portion of the result. In exceptional cases, those courts also took into account foreseeable changes in a debtors income or expenses. BAPCPA defines disposable income as current monthly income received by the debtor less amounts reasonably necessary to be expended for, e.g.,
the debtors maintenance and support. §1325(b)(2)(A)(i). Current monthly income, in turn, is calculated by averaging the debtors monthly income during a 6-month look-back period preceding the petitions filing. See §101(10A)(A)(i). If a debtors income is below the median for his or her State, amounts reasonably necessary include the full amount needed for maintenance or support, see §1325(b)(2)(A)(i), but if the debtors income exceeds the state median, only certain specified expenses are included, see §§707(b)(2), 1325(b)(3)(A).
A one-time buyout from respondents former employer caused her current monthly income for the six months preceding her Chapter 13 petition to exceed her States median income. However, based on the income from her new job, which was below the state median, and her expenses, she reported a monthly disposable income of $149.03. She thus filed a plan that would have required her to pay $144 per month for 36 months. Petitioner, the Chapter 13 trustee, objected to confirmation of the plan because the proposed payment amount was less than the full amount of the claims against respondent, and because she had not committed all of her projected disposable income to repaying creditors. Petitioner claimed that the mechanical approach was the proper way to calculate projected disposable income, and that using that approach, respondent should pay $756 per month for 60 months. Her actual income was insufficient to make such payments.
The Bankruptcy Court endorsed a $144 payment over a 60-month period, concluding that projected requires courts to consider the debtors actual income. The Tenth Circuit Bankruptcy Appellate Panel affirmed, as did the Tenth Circuit, which held that a court calculating projected disposable income should begin with the presumption that the figure yielded by the mechanical approach is correct, but that this figure may be rebutted by evidence of a substantial change in the debtors circumstances.
Held: 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. Pp. 618.
(a) Respondent has the better interpretation of projected disposable income. First, such a forward-looking approach is supported by the ordinary meaning of projected. See Asgrow Seed Co.
v. Winterboer
, 513 U. S. 179. In ordinary usage future occurrences are not projected based on the assumption that the past will necessarily repeat itself. While a projection takes past events into account, adjustments are often made based on other factors that may affect the outcome. Second, projected appears in many federal statutes, yet Congress rarely uses it to mean simple multiplication. See, e.g., 7 U. S. C. §1301(b)(8)(B). By contrast, as the Bankruptcy Code shows, Congress can make its mandate of simple multiplication unambiguouscommonly using the term multiplied. See, e.g.
, 11 U. S. C. §1325(b)(3). Third, under pre-BAPCPA case law, the general rule was that courts would multiply a debtors current monthly income by the number of months in the commitment period as the first step in determining projected disposable income, but would also have discretion to account for known or virtually certain changes in the debtors income. This is significant, since the Court will not read the Bankruptcy Code to erode past bankruptcy practice absent a clear indication that Congress intended such a departure, Travelers Casualty & Surety Co. of America
, 549 U. S. 443, and Congress did not amend the term projected disposable income in 2005. Pp. 610.
(b) The mechanical approach also clashes with §1325s terms. First, §1325(b)(1)(B)s reference to projected disposable income to be received in the applicable commitment period strongly favors the forward-looking approach. Because respondent would have far less than $756 per month in disposable income during the plan period, petitioners projection does not accurately reflect disposable income to be received. In such circumstances, the mechanical approach effectively reads that phrase out of the statute. Second, §1325(b)(1)s direction to courts to determine projected disposable income as of the effective date of the plan, i.e., the confirmation dateis more consistent with the view that they are to consider postfiling information about a debtors financial situation. Had Congress intended for projected disposable income to be no more than a multiple of disposable income, it could have specified the plans filing
date as the effective date. Third, §1325(b)(1)(B)s requirement that projected disposable income will be applied to make payments is rendered a hollow command if, as of the plans effective date, the debtor lacks the means to pay creditors in the calculated monthly amounts. Pp. 1112. (c) The arguments supporting the mechanical approach are unpersuasive. The claim that the Codes detailed and precise disposable income definition would have no purpose without the mechanical approach overlooks the important role that this statutory formula plays under the forward-looking approach, which begins with a disposable income calculation. The Tenth Circuits rebuttable presumption analysis simply heeds the ordinary meaning of projected. This Court rejects petitioners argument that only the mechanical approach is consistent with §1129(a)(15)(B), which refers to projected disposable income of the debtor (as defined in section 1325(b)(2)). And the Court declines to infer from the fact that §1325(b)(3) incorporates §707which allows courts to consider special circumstances, but only with respect to calculating expensesthat Congress intended to eliminate, sub silentio
, the discretion that courts previously exercised to account for known or virtually certain changes. Pp. 1214.
(d) Petitioners proposed strategies for avoiding or mitigating the harsh results that the mechanical approach may produce for debtorsa debtor could delay filing a petition so as to place any extraordinary income outside the 6-month period; a debtor with unusually high income during that period could seek leave to delay filing a schedule of current income and ask the bankruptcy court to select a 6-month period more representative of the debtors future disposable income; a debtor could dismiss the petition and refile at a later, more favorable date; and respondent might have been able to obtain relief by filing under Chapter 7 or converting her Chapter 13 petition to one under Chapter 7are all flawed. Pp. 1418.
and Stevens, Kennedy, Thomas, Ginsburg, Breyer, and Sotomayor, JJ.,
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). 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).
Section 1325 of Title 11 specifies circumstances under which a bankruptcy court shall and may not confirm a plan. §1325(a),(b). If an unsecured creditor or the bankruptcy trustee objects to confirmation, §1325(b)(1) requires the debtor either to pay unsecured creditors in full or to pay all projected disposable income to be received by the debtor over the duration of the plan.
We granted certiorari to decide how a bankruptcy court should calculate a debtors projected disposable income. Some lower courts have taken what the parties term the mechanical approach, while most have adopted what has been called the forward-looking approach. We hold that the forward-looking approach is correct.
As previously noted, §1325 provides that if a trustee or an unsecured creditor objects to a Chapter 13 debtors plan, a bankruptcy court may not approve the plan unless it provides for the full repayment of unsecured claims or provides that all of the debtors projected disposable income to be received over the duration of the plan will be applied to make payments in accordance with the terms of the plan. 11 U. S. C. §1325(b)(1); see also §1325(b)(1) (2000 ed.). Before the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), 119Stat.
23, the Bankruptcy Code (Code) loosely defined disposable income as income which is received by the debtor and which is not reasonably necessary to be expended for the maintenance or support of the debtor, for qualifying charitable contributions, or for business expenditures. §1325(b)(2)(A), (B).
The Code did not define the term projected disposable income, and in most cases, bankruptcy courts used a mechanical approach in calculating projected disposable income. That is, they first multiplied monthly income by the number of months in the plan and then determined what portion of the result was excess or disposable. See 2 K. Lundin, Chapter 13 Bankruptcy §164.1, p. 1641, and n. 4 (3d ed. 2000) (hereinafter Lundin (2000 ed.)) (citing cases).
In exceptional cases, however, bankruptcy courts took into account foreseeable changes in a debtors income or expenses. See In re Heath
, 182 B. R. 557, 559561 (Bkrtcy. App. Panel CA9 1995); In re Richardson
, 283 B. R. 783, 799 (Bkrtcy. Ct. Kan. 2002); Tr. of Oral Arg. 7. Accord, 1 Lundin §35.10, at 3514 (2000 ed.) (The debtor should take some care to project estimated future income on Schedule I to include anticipated increases or decreases [in income] so that the schedule will be consistent with any evidence of income the debtor would offer at a contested confirmation hearing).
BAPCPA left the term projected disposable income undefined but specified in some detail how disposable income is to be calculated. Disposable income is now defined as current monthly income received by the debtor less amounts reasonably necessary to be expended for the debtors maintenance and support, for qualifying charitable contributions, and for business expenditures. §1325(b)(2)(A)(i) and (ii) (2006 ed.). Current monthly income, in turn, is calculated by averaging the debtors monthly income during what the parties refer to as the 6-month look-back period, which generally consists of the six full months preceding the filing of the bankruptcy petition. See §101(10A)(A)(i).
The phrase amounts reasonably necessary to be expended in §1325(b)(2) is also newly defined. For a debtor whose income is below the median for his or her State, the phrase includes the full amount needed for maintenance or support, see §1325(b)(2)(A)(i), but for a debtor with income that exceeds the state median, only certain specified expenses are included,
see §§707(b)(2), 1325(b)(3)(A).
Respondent had $36,793.36 in unsecured debt when she filed for Chapter 13 bankruptcy protection in October 2006. In the six months before her filing, she received a one-time buyout from her former employer, and this payment greatly inflated her gross income for April 2006 (to $11,990.03) and for May 2006 (to $15,356.42). App. 84, 107. As a result of these payments, respondents current monthly income, as averaged from April through October 2006, was $5,343.70a figure that exceeds the median income for a family of one in Kansas. See id.
, at 78. Respondents monthly expenses, calculated pursuant to §707(b)(2), were $4,228.71. Id.
, at 83. She reported a monthly disposable income of $1,114.98 on Form 22C. Ibid
On the form used for reporting monthly income (Schedule I), she reported income from her new job of $1,922 per monthwhich is below the state median. Id.
, at 66; see also id.
, at 78. On the form used for reporting monthly expenses (Schedule J), she reported actual monthly expenses of $1,772.97. Id.
, at 68. Subtracting the Schedule J figure from the Schedule I figure resulted in monthly disposable income of $149.03.
Respondent filed a plan that would have required her to pay $144 per month for 36 months. See id.
, at 93. Petitioner, a private