## Facts

- Creditmax Collection Agency, Inc. obtained an Indiana state-court judgment against Isiah T. Harris and a wage-garnishment order directing Harris’s employer to pay part of Harris’s wages to Creditmax.
- The state court entered the garnishment order more than 90 days before Harris filed a Chapter 7 bankruptcy petition.
- During the 90 days immediately preceding the petition date, Harris’s employer paid Creditmax slightly more than $3,700 pursuant to the garnishment order, on account of an antecedent debt and without Creditmax providing new value.
- Mark A. Warsco, the Chapter 7 trustee, sued under 11 U.S.C. § 547(b) to avoid and recover the garnished wage payments as preferential transfers.
- Creditmax argued that, under prior circuit precedent applying Indiana law, the relevant “transfer” occurred when the garnishment order was entered (outside the 90-day preference period), not when the wages were later paid (inside the 90-day period).
- The bankruptcy court denied the trustee’s request based on that precedent, and the trustee obtained direct appellate review in the court of appeals.

## Issues

1. Whether the meaning and timing of a “transfer” for purposes of 11 U.S.C. § 547(b) are governed by federal bankruptcy law or by state law.
2. In a wage-garnishment scenario, whether the relevant “transfer” occurs when the garnishment order is entered or when the creditor actually receives the garnished wages.

## Decision

- The court of appeals reversed and remanded.
- It held that federal law, as interpreted by the Supreme Court, defines “transfer” in § 547, displacing the circuit’s earlier state-law approach.
- It held that, for wage garnishments, the “transfer” occurs when money is actually paid to the creditor, not when the garnishment order is entered.
- Because the payments to Creditmax occurred within 90 days before the bankruptcy filing, they fell within the statutory preference period and could be avoidable if the remaining § 547(b) elements were satisfied.

## Legal Principles

- The definition of “transfer” in 11 U.S.C. § 547 is a matter of federal bankruptcy law; contrary circuit precedent must yield to intervening Supreme Court authority.
- For § 547(b)(4)(A), the operative transfer date is when the creditor receives payment (when funds change hands), not when an earlier instruction to pay (such as a garnishment order) is issued.
- A wage-garnishment order is treated like an instruction that may or may not result in payment; the preference analysis focuses on the actual payment event.

## Conclusion

The court held that wage payments garnished and received by a creditor within the 90-day prepetition period are “transfers” under § 547 even if the garnishment order was entered earlier, and it overruled prior circuit precedent that tied the transfer date to state-law garnishment mechanics.


Warsco v. Creditmax Collection Agency, Inc., 56 F.4th 1134 (7th Cir. 2023)