Date: 05-03-2001

Case Style: Morehead v. State Farm Mutual Insurance Company

Case Number: 99-6430

Judge: Gaughan

Court: United State Court of Appeals for the Sixth Circuit

Plaintiff's Attorney: Joseph H. Bennett of Western Kentucky Legal Services, Inc., Owensboro, Kentucky

Defendant's Attorney: Richard L. Walls of Bennett, Bowman, Triplett & Vittitow, Owensboro, Kentucky

Description: The parties stipulated to the following facts before the bankruptcy court. State Farm filed a lawsuit against Morehead on January 3, 1993 and obtained a judgment against her on March 24, 1995. State Farm issued a wage garnishment to Morehead's employer on or about February 12, 1996, September 9, 1996 and June 12, 1997. On November 12, 1997, Morehead filed a voluntary petition in Bankruptcy Court under Chapter 7. On November 14, 1997, the bankruptcy court entered an order staying wage deductions by creditors. Within the 90 days immediately preceding the filing of Morehead's bankruptcy, State Farm withheld Seven Hundred Twenty-one Dollars and Thirty-five Cents ($721.35) from her paycheck. The trustee did not attempt to avoid the transfer. However, Morehead filed an Adversary Proceeding on January 28, 1998 to recover these funds. The bankruptcy court found that State Farm obtained its status as a perfected lien creditor when it served the garnishment order on Morehead's employer. Because perfection occurred prior to the beginning of the 90-day preference period, the bankruptcy court held that no preferential transfer occurred. The district court agreed and affirmed. Morehead thereafter filed a timely notice of appeal.

Outcome: For the reasons set forth below, we REVERSE the judgment of the district court.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

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