Brandon Pierce v. Collection Associates, Inc., 779 F.3d 814

Background

Brandon Pierce had six pre-petition wage garnishments totaling $858.98 by Collection Associates; four garnishments ($562.78) went to the creditor and two ($296.20) were returned to Pierce by the state court after the Pierces filed bankruptcy.
The Pierces filed an adversary proceeding under 11 U.S.C. § 522(h) seeking to avoid preferential transfers and recover the garnished amounts; their petition sought return of the amounts, and listed both the amounts received by the defendant and the amount returned to the court.
The bankruptcy court found the aggregate value of the property affected by the transfers the Pierces sought to avoid was less than $600 and denied relief under the § 547(c)(8) defense; the BAP affirmed.
On appeal to the Eighth Circuit, the panel affirmed the denial of relief but dismissed Nicole Pierce for lack of standing because she had not shown an ownership interest in Brandon’s wages or that the estates were consolidated.
The majority treated as operative the amount the Pierces actually sought to avoid (the $562.78 retained by Collection Associates) and held § 547(c)(8)’s $600 consumer-debtor safe harbor barred avoidance.
Judge Colloton dissented, arguing under Nebraska law wages were transferred when earned and the Pierces’ petition sought to avoid the entire $858.98 transfer, so the § 547(c)(8) bar (less than $600) should not apply.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether § 547(c)(8) consumer‑debtor $600 safe harbor bars avoidance of garnished wages	Pierces: All six garnishments ($858.98) constituted transfers when wages were earned, so aggregation exceeds $600 and § 547(c)(8) does not apply	Collection Assocs.: Only the amounts still in defendant’s possession when the petition was filed (or when suit brought) count; Pierces sought avoidance of $562.78, under $600	Held: § 547(c)(8) bars avoidance because the Pierces sought to avoid only $562.78, less than $600
Whether returned garnishments (refunded to debtor pre‑suit) may be counted toward the $600 aggregation	Pierces: Returned amounts were initially transferred during the preference period and thus count toward the aggregate	Collection Assocs.: Returned amounts were no longer in creditor’s possession and cannot be part of the relief sought, so cannot be aggregated	Held: Returned garnishments not counted because Pierces did not seek to avoid those returned amounts; aggregation limited to amounts sought in petition
Standing of Nicole Pierce to bring the adversary proceeding	Pierces: Both spouses brought action; implied community/estate interest	Collection Assocs.: Only Brandon’s wages at issue; Nicole lacks injury, causation, redressability	Held: Nicole lacks standing and is dismissed for failure to show an interest in Brandon’s wages or consolidated estates
Standard of review and aggregation approach	Pierces: Aggregation of multiple transfers is proper to determine § 547(c)(8) applicability	Collection Assocs.: Aggregation only of transfers actually sought to be avoided; amounts returned before suit not part of requested relief	Held: Court accepts aggregation principle but limits aggregation to transfers the plaintiff seeks to avoid; reviews legal questions de novo

Key Cases Cited

Barnhill v. Johnson, 503 U.S. 393 (1992) (state law determines property interests for preference analysis)
Elec. City Merch. Co. v. Hailes (Matter of Hailes), 77 F.3d 873 (5th Cir. 1996) (multiple transfers may be aggregated to determine whether creditor received $600 in value)
GAF Holdings, LLC v. Rinaldi (In re Farmland Indus., Inc.), 639 F.3d 402 (8th Cir. 2011) (standard of review for appeals from the BAP and bankruptcy court)
James v. Planters Bank (In re James), 257 B.R. 67 (B.A.P. 8th Cir. 2001) (discussing standing and treatment of garnished wages in preference contexts)
Morehead v. State Farm Mut. Auto. Ins. Co. (In re Morehead), 249 F.3d 445 (6th Cir. 2001) (treating when debtor acquires property interest for preference timing purposes)