Hamilton v. Lanning

In October 2006, when Lanning (defendant) filed a Chapter 13 bankruptcy petition, she owed $36,793.36 in unsecured debt. On account of a buyout from her former employer earlier that year, her gross monthly income in April and May was greatly inflated, totaling approximately $27,346 over those two months. With the inflated payments, her average monthly income over the six months prior to filing bankruptcy was $5,343.70. Her current position paid just $1,922 per month. Lanning proposed a repayment plan under which she would pay $144 per month for 36 months. Hamilton, the Chapter 13 trustee (plaintiff), objected on the grounds that the plan would not satisfy all of the claims against her and did not fully commit her “projected disposable income” to creditors. Applying a “mechanical approach” that relied upon Lanning’s pre-bankruptcy income, the trustee proposed that she pay $756 per month over 60 months. The trustee conceded that Lanning would not be able to make those payments on her current income. The bankruptcy court approved Lanning’s plan on the condition that the term be extended to 60 months. The Court of Appeals for the Tenth Circuit affirmed, reasoning that the “mechanical approach” to determining projected disposable income was presumably correct but subject to rebuttal upon evidence of a significant change in the debtor’s circumstances. The trustee petitioned the Supreme Court for certiorari.