We garnished the wages of a debtor. The Garnishee sent payments directly to us, rather than the Court. We tried to fix this through the Court and an order was issued to the Garnishee but they still paid us directly (we reported these payments to the Court). Debtor filed Ch13 - atty laid claim to funds in the court - none are there. Total is just over $600 received. Attorney claims preferential transfer. I disagree - section 547 excludes up to $600 as I read it.
We have a 2nd lien against a motor vehicle, as well.
As I read it, Sec. 547 allows these funds to reduce the lien on home/vehicle, etc., plus the amount is barely $650.00
I say we keep the money.
If the funds were garnished after the filing of the case, you are required to send the funds to the trustee. If you keep the money you will be breaking Federal Law. This is not debatable. File your proof of claim and make sure you get paid in the plan.
Michael Christopher BurrChapter 13 Bankruptcy AttorneyChicago, IL ·
Some of the essential elements of a preferential transfer are that they occur within 90 days of the bankruptcy and they allowed the creditor to get more than they would have in a Ch.7 liquidation. I don't know for sure how it plays out if you try to divide what was received outside the 90 day period versus what was received within the 90 days, but that may be an argument as well.
If an amount in excess of $600 was taken from a debtor within the 90 day period prior to filing bankruptcy, this is considered a preference and can be recovered for the benefit of the bankruptcy estate. If the debtor is able to exempt the proceeds, then the debtor or his attorney can sue for turnover of these proceeds.
I believe you are misinterpreting 11 USC sec 547(c)(8), which states that the aggregate an aggregate amount of less than $600 is excluded from the trustee's reach. Put simply, any aggregate amount exceeding $600 is subject to turnover.
One thing you have on your side is the amount. There are very few debtor attorneys who would take the time to sue you for an amount of $650. So, you may be able to just ignore the debtor attorney. But if he ends up suing you, you will likely be forced to give the money back.
So, in summary, tehcnically you have to give the money back, but since the amount is so small, you may be able to avoid paying the money because it is unlikely someone would filing a lawsuit for turnover for $650.
Hope this helps!
www.lawcmc.com
Once the amount is over $600.00, is pre-petition, and within 90 days of the petition date, the entire amount is subject to turnover to the Chapter 13 Trustee/Debtor. Alternate theory of recovery may be 11 U.S.C. Sec, 548. Debtor's attorney is right.
