In re James P. Lawrence and Mary E. Lawrence

Summary

The United States Bankruptcy Court for the Eastern District of New York considered whether voluntary payments made through an income execution within 90 days before a Chapter 13 bankruptcy filing constituted avoidable preferential transfers under 11 U.S.C. § 547(b). The court distinguished In re Riddervold because the employer had not been served and no novation occurred. Although the court found the payments potentially avoidable, it denied the debtors’ motion because they failed to show that the recovered funds could be exempted under 11 U.S.C. § 522(h).

Holdings

1. Because the income execution was never served on the employer, no novation occurred, and the debtor retained an interest in the money voluntarily paid to the Sheriff. The payments made within 90 days before the petition therefore constituted transfers within § 547(b) that a trustee could avoid.
2. The debtors could not obtain recovery because they failed to prove that, if the trustee had avoided the payments, they could have exempted the recovered funds under § 522(d)(5) and any applicable unused portion of § 522(d)(1).

Questions Presented

1. Whether voluntary payments made by the debtor to a sheriff within 90 days before the bankruptcy petition constituted transfers avoidable under 11 U.S.C. § 547(b).
2. Whether the debtors could avoid and recover the payments under 11 U.S.C. § 522(h) without showing that the recovered funds would be exempt under § 522(d).

Disposition

other