GREAT NEWS FOR CHAPTER 13 DEBTORS, U.S. Supreme Court

[spidge]

I don't see how an annual bonus could be left out of the calculations if it is a normal part of compensation, even though it only occurs once annually. This stinks a little if you ask me. If you are an hourly employee and your manager makes marginally more annually but only after bonus he/she will qualify for a lower Ch13 payment. Am I reading this wrong? There must be more to it. Now if there is a one time insurance payout or something that is not income related I can see how that may be left out of the calculation.

[LadyInTheRed]

I don't see how an annual bonus could be left out of the calculations if it is a normal part of compensation, even though it only occurs once annually. This stinks a little if you ask me. If you are an hourly employee and your manager makes marginally more annually but only after bonus he/she will qualify for a lower Ch13 payment. Am I reading this wrong? There must be more to it. Now if there is a one time insurance payout or something that is not income related I can see how that may be left out of the calculation.

The annual bonus would not be included in the 6 month look back on the means test, but it should be included in income on Schedule I if it is expected to continue. I don't see where it is suggested that it wouldn't be.

[spidge]

The US Supreme Court upheld the ruling out of the 10th circuit of In Re Lanning

http://www.supremecourt.gov/opinions/09pdf/08-998.pdf

Hamilton v. Lanning 08-998

The Supreme Court has adopted the Forward looking approach for determining disposable income for the chapter 13 plan payment. In a nutshell, no more stupid objections from Chapter 13 trustees if you have a bonus, severance, or other 1 time income event in your prior 6 month look back that eschews your monthly payment calculation. Chapter 13's are to be based on a common sense understanding of "projected" disposable income.

The annual bonus would not be included in the 6 month look back on the means test, but it should be included in income on Schedule I if it is expected to continue. I don't see where it is suggested that it wouldn't be.

In the original post.

[LadyInTheRed]

In the original post.

I still don't understand your question then. A bonus that is a normal part of compensation is not a "1 time income event". The ruling didn't change what gets included in the 6 month look back. It changes how that may affect the calculation of your plan payment going forward. If you had a one time bonus during the 6 month look back, your schedule I would not have to include it if you weren't going to get the bonus every year. But, if there is a regular annual bonus that isn't included in the 6 month look back, it would have to be included in projected income on schedule I. The ruling isn't so good for somebody in that situation.

[dougmanct]

So...quick question:

Would this Supreme Court decision lead one to conclude, then, that if a Ch 13 filer won some money gambling in the six months prior to filing, but as part of turning a new leaf in line with filing BK is no longer gambling, that the wins would not be considered part of the calculations for disposable income / affect his or her payment plan?

[justbroke]

So...quick question:

Would this Supreme Court decision lead one to conclude, then, that if a Ch 13 filer won some money gambling in the six months prior to filing, but as part of turning a new leaf in line with filing BK is no longer gambling, that the wins would not be considered part of the calculations for disposable income / affect his or her payment plan?

Not in the sense you're thinking. The Means Test is an arbitrary calculation set as a so-called "bright-line" test of whether you qualify. When it comes to determining a Chapter 13 payment, it is almost always a "current view" with a slant towards the future.

[Monicak1971]

Am I correct in understanding that if there is a definite and provable change of income anticipated, that income is to be used ? For example through December 2012 my husband was assigned to an overseas tour and received additional pay. This ended when he returned and he is not on orders to leave again. This is about a 500 per month difference in our income.

Monica

[justbroke]

Monica, yes that is what you are to do. However, some Attorneys may suggest filing with the current income and then filing a Modification of Confirmed Plan when the income actually changes. It is really dependent on what your District allows and/or whether the Trustee is okay with proposing a step-down plan.