515 B.R. 208
Bankr. D. Md.2014Background
- Debtor Jane L. Fairweather is a real-estate agent paid by commissions through NRT Mid-Atlantic, LLC d/b/a Coldwell Banker Residential Brokerage (CBRB).
- Monument Bank obtained confessed judgments against the Debtor’s guaranty obligations and served writs of garnishment on CBRB on March 12, 2014 (before the 90‑day preference period preceding Debtor’s July 8, 2014 bankruptcy filing).
- CBRB acknowledged holding substantial commissions payable to the Debtor, including commissions that became payable during the 90‑day preference period ("Preference Period Commissions").
- The Debtor filed an adversary complaint seeking avoidance under 11 U.S.C. § 547 of the garnishment with respect to Preference Period Commissions and challenged the scope of federal garnishment limits under Subchapter II of the Consumer Credit Protection Act (CCPA).
- Parties agreed all § 547 elements except whether a transfer occurred during the preference period; court treated cross-motions for summary judgment on that issue.
Issues
| Issue | Plaintiff's Argument (Fairweather) | Defendant's Argument (Monument Bank) | Held |
|---|---|---|---|
| Whether Bank received a "transfer" under 11 U.S.C. § 547 when its garnishment lien attached to commissions that became due during the 90‑day preference period | Attachment of the garnishment to commissions as they were earned during the preference period is a transfer subject to avoidance | The lien was perfected when writ was served (before the preference period), so no transfer occurred during the preference period | Held for Debtor: transfer occurred when Debtor acquired rights (commissions earned/payable) during the preference period, so avoidable under § 547 |
| Whether Subchapter II garnishment limits of the CCPA apply only to consumer debts or to nonconsumer debts as well | CCPA §1673 limits apply to "any debt" and protect earnings regardless of consumer/nonconsumer origin | Limits apply only to consumer debts; apply FDCPA/consumer‑debt definition to Subchapter II | Held for Debtor on the legal question: Subchapter II garnishment limitations apply to both consumer and nonconsumer debts; further factual application reserved |
Key Cases Cited
- Northwestern Nat. Ins. Co. v. William G. Wetherall, Inc., 298 A.2d 1 (Md. 1972) (garnishment attachment creates an inchoate lien binding on property then possessed and that which comes into garnishee's hands before judgment)
- Walutes v. Baltimore Rigging Co., 390 F.2d 350 (4th Cir. 1968) (Fourth Circuit precedent on garnishment timing cited against contrary authority)
- Cox v. Gen. Elec. Corp., 10 B.R. 268 (Bankr. D. Md. 1981) (application of § 547(e)(3) — transfer occurs when debtor acquires rights)
- In re Krumpe, 60 B.R. 575 (Bankr. D. Md. 1986) (writ of garnishment lien does not effect a transfer until wages/earnings are actually earned)
- In re Wilkinson, 196 B.R. 311 (Bankr. E.D. Va. 1996) (execution lien is a transfer but only when debtor has rights in the property; wages garnished are transfers when earned)
- Freedom Group, Inc. v. Lapham‑Hickey Steel Corp. (In re Freedom Group), 50 F.3d 408 (7th Cir. 1995) (held transfer occurs only on final garnishment order; acknowledged as contrary to majority authority)
- In re Robinson, 240 B.R. 70 (Bankr. N.D. Ala. 1999) (held CCPA Subchapter II garnishment limits apply to nonconsumer debts)