Opinion
Case No. 97-20853, Chapter 7, Adversary No. 97-2081
August 10, 1998
DECISION ON MOTIONS FOR SUMMARY JUDGMENT
The summary judgment motions filed by the plaintiff, Cathy Coggins, and the defendant, Credit Bureau of Sheridan, came before the court for hearing on August 4, 1998. The court has considered the undisputed facts, the arguments of the parties, and the applicable law and, for the reasons stated on the record herein, concludes that the plaintiff's motion should be denied and the creditor/defendant's motion should be granted.
The court has jurisdiction over this case pursuant to 28 U.S.C. § 157 and 1334. This is a core proceeding within the definition of § 157(b)(E) (O).
The complaint states a claim under 11 U.S.C. § 362(h) for damages and turnover. There are two issues: whether the Credit Bureau violated the automatic stay imposed by 11 U.S.C. § 362(a) by refusing to turn over garnished wages to the debtor; and second, which of the three parties to this case has a right to garnishment funds.
On June 18, 1997, the debtor and her employer were served with a writ of garnishment by the Credit Bureau. Under this court's ruling in Buck Broadcasting Corporation v. Curtis, Adv. No. 94-2019 at 15 (Bankr.D.Wyo. May 12, 1995), the service of the writ created a lien on the wages in which the debtor had acquired the right to payment.
On June 18, 1997, Ms. Coggins' employer owed her wages in the net amount of $528.52 subject to the perfected lien of the Credit Bureau. Id. The garnishee's answer, dated after the bankruptcy case was filed, contained a calculation of the amount of wages the debtor could exempt under Wyoming law, and indicated that there was $132.13 in nonexempt funds subject to the writ.
On June 25, 1997, Ms. Coggins filed her voluntary chapter 7 petition. That same date the Credit Bureau called Ms. Coggins' employer to stop the garnishment. However, the funds had already been transmitted. On June 25, 1997, the process was begun to dismiss the garnishment which occurred on July 7, 1997.
First Ms. Coggins argues the Credit Bureau had an affirmative duty to release the garnishment on notice of the bankruptcy filing. The court agrees. A creditor may not continue postpetition collection efforts, and the failure to release a garnishment may be a willful violation of the automatic stay. In re Prusinowski, No. 96-10293 (Bankr.D.Wyo. January 17, 1997).
Even so, the undisputed facts are that the Credit Bureau telephoned the employer to stop the garnishment the same day that the bankruptcy case was filed, June 25, 1998. On July 7, 1998, the garnishment was formally released. These facts do not support a finding that the Credit Bureau violated the automatic stay.
Next, Ms. Coggins argues that she was personally entitled to the funds and the failure to pay them to her violated the automatic stay of § 362(a). The court disagrees.
The filing of the petition created an estate. 11 U.S.C. § 541. Under § 541(a), the debtor's right to the prepetition wages became property of the estate, whether encumbered by a lien or exemptible.
This court has adopted the reasoning in cases holding that the refusal to turnover property of the estate to the debtor in a chapter 13 case is a violation of the automatic stay if the creditor has knowledge of the bankruptcy filing. General Motors Acceptance Corp. v. Ryan, 183 B.R. 288, 289 (M.D.Fla. 1995). However, those cases are inapplicable here because in a chapter 7 case, the trustee is the party entitled to the funds.
When the estate was created, Mr. Royal had a right to demand turnover of the wages due prepetition from either the debtor or the creditor or the garnishee. 11 U.S.C. § 521(4), 542(a) 543. In a chapter 7 case, a creditor must turn over estate property in its possession to the trustee. 11 U.S.C. § 542(a). That is what the Credit Bureau did.
Nor is the rule different because Ms. Coggins retains a right to contest the exemption calculation made by her employer. A right to contest an administrative calculation does not expand one's exemption to include nonexempt property. Ms. Coggins reads more into the cases she cites than those cases resolve. In re Koch, 197 B.R. 654, 660 (Bankr.W.D.Wis. 1996).
Furthermore, in this case Ms. Coggins has already been paid her portion of the wages, the exempt portion. She does not have an exemption in the funds in dispute here.
The circumstances of this case leave the ultimate disposition of the funds within the trustee's discretion. The trustee is entitled to the nonexempt portion of Ms. Coggins' prepetition wages unless he abandons the property. However, unless he takes action to avoid the perfected lien, the money is encumbered by the lien.
If Mr. Royal does not intend to take action to avoid the lien of the Credit Bureau, the court assumes he will turn the funds over to the Credit Bureau. Under that circumstance, it is the party entitled to the funds. The court will issue judgment in accordance with this decision.