Electric City Merchandise Company (“Electric City”) appeals the bankruptcy court’s judgment, affirmed by the district court, holding that Sherry Hailes may recover her garnished wages, pursuant to 11 U.S.C. § 547(b). We affirm.
Electric City obtained a judgment against Hailes and served a writ of garnishment upon her employer. Pursuant to the writ, Electric City received, in the aggregate, over $600. However, each individual payment was less than $600. Hailes then filed for protection under Chapter 13 of the Bank
The parties agree that the garnished proceeds constitute a preferential transfer under § 547(b); however, Electric City contends that the proceeds fall under an exception to the preference rule which makes them unavoidable. Section 547(c)(8) of Title 11 makes a transfer unavoidable “if, in a case filed by an individual debtor whose debts are primarily consumer debts, the aggregate value of all property that constitutes or is affected by such transfer is less than $600.” 11 U.S.C. § 547(c)(8). Electric City argues that in determining whether a creditor has received $600 in value, a court must focus on each individual transfer. Because each of the individual transfers of Hailes’ garnished wages were less than $600, Electric City maintains that each transfer is exempt from the preference rule under § 547(c)(8). Hailes argues that the transfer in this case was the writ of garnishment; therefore, the aggregate value of the transfer should be measured by the sum of all of the payments. Under Hailes’ theory, the aggregate value of the transfer exceeded $600, and § 547(c)(8) would not exempt the garnished proceeds from the preference rule.
Therefore, the sole issue on appeal is whether, under § 547(c)(8), a court may aggregate all transfers to a single creditor to determine whether the creditor received $600 in value in the pre-filing period or whether each transfer must be evaluated individually. The issue has divided the few courts that have considered it.
Compare In re Djerf
Section 547(c)(8) applies when the “aggregate value” of “all property” that constitutes
Section 547(c)(8)’s legislative history further supports our conclusion. In enacting this exception to the preference rule, Congress intended to allow debtors to transfer
small amounts
of money to consumer creditors before the filing of a bankruptcy petition, despite the fact that the transfers might have a preferential effect.
Alarcon,
Aggregating all transfers to a creditor in the pre-filing period to determine whether the creditor has received $600 will preserve consumer creditors’ small preference exception without creating a windfall. Because Electric City received pre-petition transfers whose aggregate value exceeded $600, we hold that Hailes may recover these amounts pursuant to 11 U.S.C. § 547(b).
For the foregoing reasons, we AFFIRM the judgment of the district court.
Notes
. Instead of objecting to Electric City's claim, Hailes should have attempted to avoid the preferential transfer to Electric City pursuant to 11 U.S.C. § 547, as required by Bankruptcy Rule 7001. However, in the interest of judicial economy, the bankruptcy court elected to consider Hailes’ objection as if she had followed the proper procedure.
. Section 547(b) defines "preferential transfer” as:
any transfer of an interest of the debtor in property—
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made—
(A) on or within 90 days before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and
(5) that enables such creditor to receive more than such creditor would receive if—
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
11 U.S.C. § 547(b).