Hamilton v. Lanning
The Supreme Court ruled that bankruptcy courts calculating a Chapter 13 debtor's required future payments don't have to rely solely on a mechanical multiplication of past income — they can factor in income or expense changes that are already known or virtually certain to happen.
The decision sided with a Kansas woman whose brief one-time severance payment had artificially inflated her recent income, letting her keep a lower, more realistic payment plan rather than one based on money she no longer had coming in.
“in ordinary usage future occurrences are not “projected” based on the assumption that the past will necessarily repeat itself”
Explaining why the word 'projected' implies adjusting for known future changes, not just repeating past figures.
How it got here: The bankruptcy court and the Tenth Circuit Bankruptcy Appellate Panel sided with the debtor; the Tenth Circuit Court of Appeals affirmed, and the trustee asked the Supreme Court to review the case.
The Case in Depth
What happened
A Kansas woman filed for Chapter 13 bankruptcy after losing her old job. A one-time buyout from her former employer had temporarily inflated her income in the months just before filing, even though her new job paid much less. Her bankruptcy trustee argued she had to pay creditors based on that inflated historical income, while she argued her actual, lower current income should control her repayment plan.
The question before the Court
When a bankruptcy court figures out how much a struggling debtor must pay creditors each month, must it simply multiply past income, or can it account for income changes everyone already knows are coming?
The Court's answer
The Court ruled that bankruptcy courts are not stuck with a rigid multiplication formula when calculating a debtor's required future payments under Chapter 13. Instead, in exceptional cases, a court may adjust the standard calculation to account for changes in the debtor's income or expenses that are already known or virtually certain to happen by the time the plan is confirmed.
Applying that rule here, the Court agreed that the debtor's brief, one-time severance payment shouldn't lock her into payments she could never actually make, since her real going-forward income was far lower. The lower courts had reached the right result, so the Tenth Circuit's ruling in her favor was affirmed.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Chapter 13 debtors whose recent income was temporarily inflated (a severance payout, a bonus, overtime that has since ended) won't be locked into payment plans based on money they no longer earn. Bankruptcy trustees and courts nationwide now have clearer guidance for handling debtors whose financial circumstances shift around the time they file, rather than applying a rigid formula that could deny bankruptcy relief to people who genuinely qualify for it.
What changes now
The ruling is final on the legal question of how to calculate projected disposable income; there is no remand needed because the lower courts had already reached the correct result. The decision will guide bankruptcy courts nationwide going forward whenever a debtor's income or expenses have changed significantly around the time of filing, letting courts adjust standard income calculations in exceptional cases rather than always applying a fixed multiplication.
What this does not decide
The Court's holding is limited to genuinely exceptional cases involving known or virtually certain changes in income or expenses; it does not authorize courts to routinely second-guess a debtor's calculated disposable income based on speculative or merely possible future changes.
Concurrences and dissents
Dissent — Justice Scalia
“That interpretation runs aground because it either renders superfluous text Congress included or requires adding text Congress did not.”Scalia's core objection that the majority's reading has no grounding in the statute's actual words.
Justice Scalia argued the majority's reading has no basis in the statutory text, which defines 'disposable income' using a fixed historical formula tied to a specific six-month period. He contended that if 'projected' allows courts to override that formula at all, nothing in the text limits departures to 'exceptional' or 'known or virtually certain' changes — the majority invented those limits to soften an otherwise strict formula. He would have required courts to simply multiply the defined historical income figure by the number of months in the plan, leaving debtors facing hardship to seek relief through existing mechanisms like plan modification, delayed filing, or Chapter 7.
How the Court got there
The legal reasoning, step by step
- The Court looked to the ordinary meaning of the undefined word 'projected' in the statute, reasoning that everyday projections — of sales, election results, or sports outcomes — adjust for known future changes rather than blindly assuming the past will repeat.
- The Court compared how Congress uses 'projected' versus 'multiplied' elsewhere in federal law and in the Bankruptcy Code itself, finding that Congress reliably uses 'multiplied' when it means simple arithmetic, which suggested 'projected' was meant to allow more flexibility.
- The Court examined pre-2005 bankruptcy practice and found that courts already had discretion to adjust a debtor's calculated income for known or virtually certain changes, and it applied the principle that it will not read the Bankruptcy Code to wipe out established bankruptcy practice absent a clear signal from Congress that it intended to do so.
- The Court found that reading the statute to require rigid multiplication would make several statutory phrases pointless — particularly the requirement that a debtor pay disposable income 'to be received' during the plan and that this figure be calculated 'as of the effective date of the plan,' both of which point to a forward-looking calculation rather than a fixed historical snapshot.
- The Court concluded that bankruptcy courts may begin with the standard income calculation but, in exceptional cases, may adjust it to reflect changes in income or expenses that are known or virtually certain to occur by the time the plan is confirmed.
Doctrinal impact
Cases affected by this decision
Reaffirms Travelers Casualty & Surety Co. of America v. Pacific Gas & Elec. Co. (549 U. S. 443)
The Court relied on this case's principle that courts won't assume Congress silently erased established bankruptcy practice.