Tower Credit v. Schott

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After debtor filed for Chapter 7 bankruptcy in 2012, the bankruptcy court appointed a trustee to debtor's estate. In 2014, the trustee initiated this adversary proceeding, seeking to void the garnishments collected by Tower Credit within ninety days prior to debtor's filing for bankruptcy as preferential transfers pursuant to 11 U.S.C. 547(b). The bankruptcy court ultimately granted summary judgment to the trustee and the district court affirmed. The court explained that the combination of Supreme Court precedent and the overwhelming weight of persuasive authority applying section 547(e)(3) make clear that a debtor's wages cannot be transferred until they are earned. Therefore, the court held that a creditor's collection of garnished wages earned during the preference period was an avoidable transfer made during the preference period even if the garnishment was served prior to that period. Accordingly, the court affirmed the judgment. View "Tower Credit v. Schott" on Justia Law