A recent Supreme Court decision should allow for debtors in future bankruptcy cases to have more affordable payments. The Supreme Court in Hamilton v. Lanning has made a decision which should allow debtors to propose Chapter 13 payment plans which take the debtors’ actual income and expenses into account.
Prior to this decision, debtors’ Chapter 13 payments were calculated based on the “means test.” The means test essentially takes the six month period before debtors filed bankruptcy and uses the income earned during that period to determine what debtors should be able to afford to pay their creditors through their Chapter 13 plan. This number frequently does not reflect the debtors’ actual income or expenses. Often debtors finds that they can not afford to file a Chapter 13 case.
With this decision the number determined by the means test is now merely a starting point. Debtors may now more easily propose a plan that will take their current and future situation into consideration. This decision will give more discretion to the court to approve plans where the plan payments deviate for the means test calculation, but conform with the debtors actual current financial situation.
This change should allow more individuals to qualify to file a Chapter 13 and should increase the likelihood that those individuals will be able to successfully complete their plans.