The U.S. Supreme Court recently issued several decisions in consumer bankruptcy court cases.
Each case addressed an issue that divided the circuit courts across the country. In the case of Schwab v. Reilly, the Supreme Court held that where a debtor claims a certain dollar exemption in property, the exemption is limited to the precise amount claimed by the debtor.
The debtor in the Schwab case believed the personal property being claimed exempt (certain business equipment) were worth approximately $10,000, and therefore claimed that amount exempt.
The trustee concluded the property was worth $17,000 and attempted to sell the property.
The debtor objected, arguing that the trustee should have challenged the exemption if he thought the exemption didn’t protect the entire property value.
The Supreme Court’s ruling means that bankruptcy trustees may challenge the amount of an exemption well past the exemption objection deadline.
In the second case, Hamilton v. Lanning, the Supreme Court held that determining projected disposable income for the purposes of the amount to be paid to the Chapter 13 Trustee each month under a Chapter 13 plan is not solely determined by the means test.
Some courts had held that the means test was a mechanical approach for determining a chapter 13 plan payment.
The Supreme Court concluded that the means test was a starting point for a plan payment, but it could be altered by evidence of a debtor’s income and expenses post-filing being different than the debtor’s income and expenses before filing.