Summary of a Recent
Judicial
Development in
Bankruptcy
Debtor-Dairy Farmer's Payments Not Exempted
Under Federal Garnishment Law
Joshua T. CrainNational AgLaw Center Graduate Assistant
Summary of Decision
In In re Riendeau, 336 F.3d 78 (2d Cir. 2003), the United States Court of Appeals for the Second Circuit held that the garnishment restrictions set forth in the Consumer Credit Protection Act, 15 U.S.C. § 1673, did not automatically apply in a debtor-dairy farmer's bankruptcy proceedings.
Background
The underlying facts of this case are set forth in In re Riendeau, 293 B.R. 832 (Bankr. D. Vt. 2002). Debtor Leonard Riendeau was a Vermont dairy farmer who filed for Chapter 7 bankruptcy on December 19, 2000. See id. at 834. The same month debtor filed for Chapter 7, he received two checks, one for milk produced during that month and the other a federal subsidy check for low milk prices in 2000. See id. at 834. Upon receipt of the checks, the debtor amended his Schedule C to have them exempted. See id. at 834. The trustee objected to the debtor's claimed exemptions and the debtor responded by claiming that he was entitled to an automatic, self-executing exemption under the Consumer Credit Protection Act (CCPA). See id. at 835. The bankruptcy court held a hearing and sustained the trustee's objection. See id. at 835. The debtor appealed to the United States District Court for the District of Vermont. See id. After the district court affirmed the bankruptcy court's decision, the debtor appealed to the United States Court of Appeals for the Second Circuit. See id.
Analysis and Holding
The debtor argued that the CCPA's garnishment restrictions were automatically applicable in bankruptcy. See id. at 838. The debtor relied on In re Robinson, 240 B.R. 70 (Bankr. N.D. Ala. 1999), which held that the "CCPA's restrictions apply upon actual garnishment resulting from debts that have been excepted from the discharge of bankruptcy process." In re Riendeau, 293 B.R. 832, 838 (Bankr. D. Vt. 2002). The court explained, however, that Robinson was not on point with the case at bar. See id. The court held that because there was no garnishment of the type at issue in Robinson, the garnishment restrictions did not automatically apply. See id.
The court explained that in Kokoszka v. Belford, 417 U.S. 642 (1974), the Supreme Court addressed the fact that the CCPA was not intended to alter the purpose of the bankruptcy act. See id. It also explained that the purpose of the CCPA was to help "keep debtors out of bankruptcy, and not to expand their protections once they have filed their bankruptcy petition." Id. The court further explained that the CCPA was enacted to prevent bankruptcy filings because before its enactment, the only way for many individuals to avoid garnishment was to file for bankruptcy protection. See id. Again considering the scheme surrounding the CCPA, the court held that the purpose of § 1673 was exclusively concerned with wage garnishment. See id. at 839. The court concluded that the debtor's claimed exemption under § 1673 of the CCPA was invalid. See id.
The case was decided on July 9, 2003; this summary was posted Oct. 25, 2004.