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SUPREME COURT DECISION ON "PROJECTED DISPOSABLE INCOME"
Tuesday, July 06, 2010
Last month the U.S. Supreme Court issued its opinion in the case of In re Lanning. The Supreme Court held that the term "projected disposable income" takes into account changes in income or expenses that are "known or virtually certain" as of the date a Chapter 13 plan is confirmed. As a result of this decision, the "disposable income" calculated using the means test is not necessarily the amount that has to be paid to unsecured creditors in the bankruptcy plan. If the debtor has had a change in income or expenses between the time the case was filed and the time the plan comes up for confirmation, then such a change would have to be taken into account because it was "known." Likewise, any "virtually certain" changes that will occur after confirmation must also be taken into account. The net result of this decision is that the method for calculating how much has to be paid in a Chapter 13 bankruptcy plan looks a lot like it did prior to the 2005 amendments to the Bankruptcy Code.