Projected Disposable Income vs DI

[aa06a47]

I ran across this BLOG. It is pretty interesting and has some good information on rulings handed down. I would imagine you'll see more and more ruling from the court coming out changing things in our BK world of Chapter 13. This ruling in my opinion, could have a big impact on the payments we will make in the future. Come on baby, get me confirmed and off the radar for a while...papa needs a new pair of shoes.

http://bapcpa.blogspot.com/

[anonymuse]

The whole concept of disposable income was one of those sticking points when they wrote the new legislation (based on what I've read on the web.)

They could have defined it in so many ways and for different lengths of time. No one wanted any kind of one-month history since that was just too short to provide a big picture unless you're a salaried employee or hourly employee with constant hours. But if you are in sales or have inconsistent hours, then what works better--3 months? 6 months? Do you look 6 months back or 3 months forward or both (3 months past and 3 months future)?

Judge Nelms noted that the phrase "projected disposable income" is subject to conflicting interpretations. 1325(b)(2) defines "disposable income" as "current monthly income" less certain expenses. But "current monthly income" is defined in 11 U.S.C. 101(10A) as the debtor's average income for the 6 months prior to the petition date. This can lead to anomalous results, to say the least: a debtor anticipating a significant increase in future income is incentivised to file quickly (so that the income which must be committed to the plan is based on her prior rather than future earnings), while a debtor who experiences a substantial loss of income around the time of filing might be unable to confirm a plan because she cannot devote the amount of "projected disposable income" necessary based on her prepetition income level.

After taking a close look at the statute, Judge Nelms concluded that "projected disposable income" for purposes of 1325(b) is based on the debtor's post-petition income rather than the prior six months. First, the use of "projected" before "disposable income" suggests Congress intended something other than "disposable income," under the traditional presumption that Congress acts intentionally when it uses different language in different sections of a statute. Second, the statute refers to projected disposable income "to be received" in the applicable commitment period -- language which would be superfluous (perhaps nonsensical) if Congress was referring to the debtor's pre-petition income. Finally, 1325(b)(1) requires the court to determine whether the debtor is committing all of her projected disposable income "as of the effective date of the plan." Again, the language indicates that the court should consider current income, rather than historical income.


I was surprised when I asked a lawyer about future income increases while filing for Ch 7. My income for the 6-month pre-filing period is about $34k. Now that my job has changed from contractor to fulltime, my current income is $38K (which is still below the state median income). Although I love my job, the 3 hour commute is long (and expensive with gas) so I've always got one eye open for something closer, and, of course, with better pay. I used to make around $55K, but haven't been able to do the same since layoffs.

I asked the lawyer what would happen if i got back to my old salary--this would be about a 50% increase from my current income--after I had filed. He said IT DIDN'T MATTER!!! You know, although I like the answer, I just don't think it makes sense since it isn't in the spirit of the way the BK laws were written. I would think that if I got to the 341 meeting and the trustee asks "Do you anticipate any changes in income?" and I said I have a new job starting in two weeks at $55K, I would think that I'd have to go to Ch 13 and be in a repayment plan. Can someone explain the logic that I am NOT seeing?