The 5th U.S. Circuit Court of Appeals has determined how “projected disposable income” is to be calculated in Chapter 13 bankruptcies, an important ruling that could mean debtors pay more or less to their unsecured creditors in some instances.

The case, Nowlin v. Peake, involves an issue of first impression in the 5th Circuit concerning a common problem in Chapter 13 bankruptcy proceedings: What happens when a debtor’s level of disposable income changes during the 60-month payment plan period? The court’s answer gives U.S. Bankruptcy Court judges and litigants more flexibility in dealing with that issue, several experts say.

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