Waiting for the Dust to Settle on Lanning
In theory, when the U.S. Supreme Court rules on an issue, conflict and confusion among lower courts is laid to rest. Back in March, when the Supreme Court ruled in United Student Aid Funds, Inc. v. Espinosa, the case caused much confusion in the popular press, with major newspapers suggesting that the ruling would make it easier for debtors to discharge student loan debt in bankruptcy. Bankruptcy attorneys, however, were generally clear on what the case actually addressed: the appropriate use of Federal Rule of Civil Procedure 60(b)(4).
The Lanning decision is a different matter altogether. The Court held that "when a bankruptcy court calculates a debtor’s projected disposable income, the court may account for changes in the debtor’s income or expenses that are known or virtually certain at the time of confirmation."
That seemingly simple ruling has opened up a host of questions among bankruptcy attorneys. Some argue that the decision effectively takes us back to pre-BAPCPA days, while others are concerned that the "known or virtually certain" standard actually further restricts the bankruptcy court's ability to deviate from the mechanical calculation of disposable income in determine projected disposable income. While the issue in the case and the language in the holding are limited to the determination of projected income, some bankruptcy attorneys hope the bankruptcy courts will interpret the ruling to stand for the broader proposition that real-life numbers trump the artificial calculations dictated by the forms. Still others are reporting that the Lanning decision reflects what is already common practice in their local bankruptcy courts and is unlikely to have any significant impact.
If bankruptcy court interpretations are as varied as those offered by bankruptcy attorneys in the first few days following the ruling, the Lanning decision will do little to reconcile the conflicting interpretations of the Code itself that the Supreme Court hoped to eliminate by ruling on this issue.
