Last month the Supreme Court took up two bankrupcy cases. The rulings which are interesting are described below:

Supreme Court Rules on Meaning of Projected Disposable Income – Hamilton v. Lanning
The Supreme Court has ruled on one aspect of how to compute a chapter 13 debtor’s projected disposable income under section 1325(b). In Hamilton v. Lanning, the court held that the word “projected” gave the bankruptcy court the flexibility to adjust the debtor’s current monthly income to take into account changes in the debtor’s income that are known or virtually certain at the time of confirmation. The court found that the ordinary meaning of the term “projected” encompassed more than simply multiplying the debtor’s current monthly income by the number of months in the applicable commitment period and had a meaning that could take into account known or virtually certain changes in income.
However, the court made clear that such adjustments to the statutory formula for computing disposable income should be made “only in unusual cases” where there is known or virtually certain information about changes in the components in the formula that are based on actual income. There is no suggestion in the decision that a bankruptcy court can rely on the term “projected” to otherwise deviate from the formula by, for example, including income that the definition of current monthly income excludes, such as social security benefits, or altering expense allowances permitted by the statute.
In the wake of Lanning courts will no doubt adopt a variety of approaches to the issue of how much discretion they have. It seems clear that debtors who have reductions in their income will be able to argue that their payments should be lower than if they were computed based on the definition of current monthly income in Code section 101. Trustees will undoubtedly argue that when income has increased the payments should be higher.
Although the facts of Lanning concerned only a change in the debtor’s income, the final paragraph of the decision states that the court can also take into account known or virtually certain changes in expenses. Chapter 13 trustees can be expected to argue that Lanning prevents above median income debtors from counting as expenses payments on property that is to be surrendered. However, because the decision is based on the term “projected disposable income”, which does not appear in section 707(b), a different treatment of payments on surrendered property may be reached in chapter 7 dismissal motions.

Schwab v. Reilly
The Supreme Court issued its decision in Schwab v. Reilly on June 17. While technically a win for the trustee, the opinion really represents a victory for debtors. The court’s ruling turned on the narrow issue of whether the trustee reasonably could interpret the debtor’s schedules as exempting only an interest of a specific dollar amount in her kitchen equipment, rather than all of the equipment. The debtor in her schedules listed the same amount for the property in the columns labeled “Value of Claimed Exemption” and “Current Market Value of Property without Deducting Exemptions.” The court accepted the trustee’s argument that it was reasonable for him to infer from this that the debtor only intended to exempt an interest in the equipment worth the amount listed, rather than her entire interest in the equipment. Therefore, the court held, the trustee did not have to object to that exemption, which on its face exempted no greater amount than the statute permitted. In so doing, the majority rejected the conclusion of the courts below and the three dissenting justices that by listing the same amount in both columns the debtor manifested an intent to exempt the entire property.
However, by ruling in this narrow manner – focused on how this particular debtor’s schedules could be interpreted by the trustee – the court also addressed a main concern which was that if trustees did not have to adhere to the objection deadline they could wait for months before acting and the question of whether property is exempt would remain in limbo. The court set forth a very simple solution to this problem: The debtor need only make absolutely clear the debtor’s intent to exempt the entire asset by listing the exempt value as “full fair market value (FMV)” or “100% of FMV.” (Slip Opinion at 20-21). Then the trustee will know that she must object within the time set by Rule 4003 or else the entire asset will be exempted.
This result should not present any problem for debtors represented by competent counsel, who should use the suggested language whenever there is any doubt about whether an exempted asset is within the amount of exemption allowed (assuming, of course, that there is a good faith argument the asset can be completely exempted.) Some attorneys may want to include this language for every asset exempted. Unfortunately, pro se debtors such as Ms. Reilly are not likely to know they should do this. Amendments to Schedule C of Official Form 6 to provide an easy way to claim assets as entirely exempt, perhaps with a box to be checked, would help standardize the process for all involved.
The Supreme Court’s decision also should resolve the problem raised by cases like In re Chappell,  where the trustee attempts to keep a case open waiting for an asset like a debtor’s home to increase in value beyond the exemption amount. If the debtor clearly indicates an intent to exempt the entire asset, the trustee must file a timely objection, based on the value at the outset of the case, or the entire asset will be exempt.