Chapter 7 Trustee (“Trustee”) filed an adversary complaint against Alternative Revenue Systems, Inc. (“ARS”), alleging claims for avoidance, preservation, turnover, and disallowance under 11 U.S.C. §§ 547, 551, 542, 543, and 502. Trustee sought to avoid transfers made by Debtor’s employer to ARS in the 90 days pre-petition pursuant to a wage garnishment. Both parties moved for summary judgment. ARS argued the relevant transfer under § 547(b) occurred when the garnishment was served on Debtor’s employer, more than 90 days pre-petition. The Trustee argued the relevant transfers occurred each time Debtor’s paycheck was garnished in the 90 days pre-petition. The Court examined a split in case law on this issue, including Straight v. First Interstate Bank (In re Straight), 207 B.R. 217 (BAP 10th Cir. 1997), cited by ARS.
The Court ultimately sided with the majority rule, holding the relevant transfer occurred each time Debtor’s paycheck was garnished within the 90 days pre-petition, regardless of when the garnishment was served. The Court also observed that service of the garnishment created a lien under Colo. Rev. Stat. § 13-54.5-102 (Colorado’s garnishment statute), but did not, in and of itself, create a lien for purposes of § 101(54) (Bankruptcy Code’s definition of “transfer” post-BAPCPA). Rather, service of the garnishment created an inchoate lien in future earnings that did not ripen until the earnings came into existence. In this particular case, a factual dispute remained as to the date wages were earned, rather than paid; thus, the Court denied summary judgment to both parties.