Bankruptcy
915 F.3d 1248 (10th Cir. 2023)
Study notes for In re: Nussbaum: professor notes, cold call prep, exam angles, and memory aids.
Post-petition income from new employment must be included in a Chapter 13 repayment plan as it represents a substantial and unforeseen change in financial circumstances.
This case emphasizes the dynamic nature of a debtor's financial circumstances post-petition, particularly in the context of Chapter 13 bankruptcy. The Tenth Circuit recognized that income from new employment can significantly affect the debtor's ability to repay debts, distinguishing it as a 'substantial and unforeseen change' warranting plan modification. Therefore, students should focus on how bankruptcy plans can be adjusted in response to fluctuations in income, particularly in exceptional economic climates like those precipitated by the COVID-19 pandemic.
Additionally, the case illustrates the need for clarity in what constitutes 'disposable income' and how debtors should be encouraged to actively report and adjust their repayment plans to reflect their true financial situation. A professor may highlight the potential implications for both debtors and creditors, considering how unexpected income might influence settlements and negotiations in bankruptcy proceedings.
NEW INCOME = PLAN ADJUSTMENT (indicating that new income requires a modification to the bankruptcy plan)
| Case | Distinction |
|---|---|
| In re: Hargis | In Hargis, the court did not find sufficient grounds for plan modification since existing income levels were stable and had not changed unexpectedly. |
| In re: Dwyer | Dwyer involved an increase in income due to other predictable sources, while Nussbaum’s income from new employment was deemed unforeseeable. |
| In re: Brown | Brown ruled that changes due to voluntary employment did not require modifications, contrasting with Nussbaum’s situation where her re-employment was not an anticipated change. |
Including post-petition income promotes fairness and increases the likelihood of successful repayment plans, ensuring that debtors contribute adequately based on their actual financial situations.
Requiring modification of plans might impose a burden on debtors who could face administrative hurdles or unwanted scrutiny regarding their income status.
This case may appear on exams as a discussion of modifications to Chapter 13 plans and the criteria for including post-petition income in bankruptcy repayment calculations, particularly in light of unforeseen employment changes.