Hamilton v. Lanning
The Court ruled that bankruptcy judges deciding how much a Chapter 13 debtor must pay creditors can adjust the calculation when the debtor's income is about to change in ways that are already known or virtually certain, rather than mechanically multiplying a fixed past-income figure by the length of the repayment plan.
The decision means debtors whose finances have improved or worsened since a snapshot six-month window won't be locked into unrealistic payment plans based on stale numbers, while still using that historical data as the normal starting point.
“in ordinary usage future occurrences are not “projected” based on the assumption that the past will necessarily repeat itself”
The Court's core reasoning for why 'projected' requires more than simple multiplication of past income.
How it got here: The bankruptcy court and a bankruptcy appellate panel sided with the debtor; the Tenth Circuit affirmed, and the trustee sought Supreme Court review.
The Case in Depth
What happened
A woman filed for Chapter 13 bankruptcy with about $86,000 in unsecured debt. In the six months before filing, she had received a one-time buyout payment from her former employer that temporarily inflated her income far above what she actually earned afterward at her new, lower-paying job. Her trustee objected to her proposed repayment plan, arguing she should pay much more based on that inflated historical income figure.
The question before the Court
When someone files for Chapter 13 bankruptcy, should the amount they must pay creditors be based just on their past six months of income, or can a court adjust for income changes it knows are coming?
The Court's answer
A court can adjust the calculation. The Court ruled that bankruptcy judges may account for changes in a debtor's income or expenses that are known or virtually certain at the time the plan is confirmed, rather than being locked into a rigid multiplication of past income. This "forward-looking approach" reflects the ordinary meaning of the word "projected," which normally involves adjusting predictions based on new information rather than assuming the past will simply repeat.
In most cases, the calculation will still start with the debtor's historical six-month income figure, and no further adjustment will be needed. But in unusual cases—like this one, where a one-time buyout distorted the debtor's true financial picture—a court can depart from that mechanical figure to reflect the debtor's actual, foreseeable ability to pay.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Debtors with a one-time income spike or drop right before filing won't be forced into payment plans they can't afford or let off the hook when they can clearly afford more. Bankruptcy trustees and courts gain flexibility to consider a debtor's real financial trajectory, affecting how repayment plans are negotiated nationwide.
What changes now
This is a final merits decision resolving the legal question nationally; the Tenth Circuit's judgment affirming approval of the debtor's plan stands. Bankruptcy courts will now apply the forward-looking approach when calculating projected disposable income in Chapter 13 cases, starting with the debtor's historical income figure but adjusting for known or virtually certain changes in unusual cases going forward.
What this does not decide
The Court did not decide exactly how significant or certain a change in a debtor's finances must be to justify departing from the historical income figure, nor did it establish a detailed test for identifying "exceptional cases." It also left most cases to be resolved using the standard historical calculation without adjustment.
Concurrences and dissents
Dissent — Justice Scalia
“The Court, in short, can arrive at its compromise construction only by rewriting the statute.”Scalia's central objection that the majority added restrictions not found in the statutory text.
Justice Scalia argued the majority's approach rewrites the statute by adding unwritten limits (requiring changes to be both 'significant' and 'known or virtually certain') that appear nowhere in the text. He read 'projected disposable income' as requiring courts to simply multiply the statutorily defined historical income figure by the number of months in the plan, treating any exceptions to that formula as available only for expenses, not income. He would have reversed and required strict adherence to the mechanical calculation, leaving debtors and creditors to use existing statutory tools like plan modification, delayed filing, or Chapter 7 to address unfair results.
How the Court got there
The legal reasoning, step by step
- The Court focused on the ordinary meaning of the word 'projected,' reasoning that projections in everyday and legal usage typically account for known future developments rather than assuming past figures will simply repeat, unlike the word 'multiplied,' which Congress uses elsewhere in the same statute when it means pure math.
- The Court examined how bankruptcy courts handled this same phrase before a 2005 overhaul of the bankruptcy law and found that courts routinely started with historical income but retained discretion to adjust for known or virtually certain changes; because Congress left the term 'projected disposable income' itself unchanged in the overhaul, the Court presumed Congress meant to preserve that established practice.
- The Court found that a rigid, backward-looking calculation clashes with three phrases in the statute: income 'to be received' in the future commitment period, a requirement to measure the figure 'as of the effective date of the plan' (the confirmation date, not the filing date), and a mandate that the calculated amount actually 'be applied to make payments' — all of which point toward a forward-looking, real-world figure rather than a fixed historical multiple.
- Applying this forward-looking framework, the Court concluded that a court should ordinarily use the debtor's historical average income as calculated under the statute's formula, and depart from it only in exceptional cases where a change in income or expenses is known or virtually certain, such as a one-time payment that does not reflect the debtor's ongoing earning capacity.