The United States Supreme Court has come to the rescue of some chapter 13 bankruptcy debtors at the risk of delivering others into the hands of creditors.
In Hamilton v. Lanning , 10 C.D.O.S. 6973, the justices ruled, 8-1, that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 does not prohibit a bankruptcy court from taking into account a debtor’s likely future income in determining the minimum payments to be made under a chapter 13 plan. In upholding the Tenth Circuit U.S. Court of Appeals’ “forward looking” approach, the court overruled the Ninth Circuit’s “mechanical” approach established by In re Kagenveama , 541 F.3d 868 (2008), which held that a debtor’s income for purposes of calculating minimum Chapter 13 plan payments is deemed to be the average income received in the six months before filing the bankruptcy petition, without regard to later increases or decreases in income.
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