Mark A. Warsco, trustee in the bankruptcy of Isiah T. Harris v. Creditmax Collection Agency, Inc.

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 22-1733
MARK A. WARSCO,
trustee in the bankruptcy of Isiah T. Harris,
Plaintiff-Appellant,
v.
C REDITMAX C OLLECTION A GENCY, INC.,
Defendant-Appellee.
____________________
Appeal from the United States Bankruptcy Court for the
Northern District of Indiana, Fort Wayne Division.
No. 22-01004-reg — Robert E. Grant, Chief Bankruptcy Judge.
____________________
SUBMITTED J ANUARY 6, 2023* — D ECIDED J ANUARY 9, 2023
____________________
Before EASTERBROOK , ST . EVE , and KIRSCH , Circuit Judges.
EASTERBROOK , Circuit Judge. Trustees in bankruptcy can re-
cover some transfers made to outside parties during the 90
days before the debtor files a petition. 11 U.S.C. §547(b)(4)(A).
Mark Warsco, trustee in the bankruptcy of Isiah Harris,
* The court granted the parties’ joint motion to waive oral argument.

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2 No. 22-1733
discovered that a little more than $3,700 had been paid to
Creditmax during those 90 days on account of Harris’s ante-
cedent debt—in other words, that Creditmax had not pro-
vided “new value” within the meaning of §547(a)(2).
Creditmax holds a judgment against Harris and used it to se-
cure a garnishment order, which required Harris’s employer
to pay some of his wages directly to Creditmax. The garnish-
ment order was issued by a state court in Indiana more than
90 days before Harris filed his bankruptcy petition. Warsco
began an adversary proceeding to recover the $3,700 for dis-
tribution among all of Harris’s creditors, without a preference
for Creditmax.
Creditmax resisted the Trustee’s application, relying on In
re Coppie, 728 F.2d 951 (7th Cir. 1984). Coppie holds two things:
first, that the definition of a “transfer” for the purpose of §547
depends on state law; second, that as a matter of Indiana law
a “transfer” occurs when a garnishment order is entered, not
when money is paid. Creditmax observed that this contro-
versy arises from a garnishment order issued in Indiana more
than 90 days before the bankruptcy commenced. The federal
bankruptcy court found Coppie controlling (Indiana law has
not changed since 1984) and denied the Trustee’s application.
2022 Bankr. LEXIS 1661 (N.D. Ind. Mar. 22, 2022). The judge
added that Coppie appears to be wrongly decided but wrote
that only this court can overrule its decisions. The Trustee
asks us to do just that. We accepted the Trustee’s appeal, by-
passing the district court. See 28 U.S.C. §158(c)(2).
Coppie is indeed wrongly decided. The reason is simple:
Barnhill v. Johnson, 503 U.S. 393 (1992), holds that federal ra-
ther than state law defines the meaning of “transfer” in §547.

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No. 22-1733 3
A decision by the Seventh Circuit in 1984 must give way to a
decision by the Supreme Court in 1992.
The result in Coppie still might be right, even though its
choice of law has been disapproved. Perhaps federal law, like
Indiana law, identifies as the “transfer” the date of an order
to pay money, or the date someone learns of that order, as op-
posed to the date on which money changes hands. But it
doesn’t. That issue, too, was resolved by Barnhill.
Barnhill arose from a check (a form of order to pay money)
that was signed and delivered outside the 90-day preference
window but paid inside that window. The Justices held that
the date of the check is irrelevant and that only payment of
the check marks a “transfer.” The rule that the “transfer” oc-
curs when money changes hands is as applicable to garnish-
ment as it is to checks. The check is an instruction to a bank,
while the garnishment order is an instruction to an employer.
In either situation things may happen after the date of the or-
der—the drawer may stop payment; the drawee may refuse
payment; the wage-earner may quit or be fired—that affect
whether any money is transferred. The Supreme Court iden-
tified as the date of transfer the time at which the money
passes to the creditor’s control.
This is not the first time that we have recognized the effect
of Barnhill on the definition of a transfer. Freedom Group, Inc.
v. Lapham-Hickey Steel Corp., 50 F.3d 408, 412 (7th Cir. 1995),
collects several decisions that do not comport with Barnhill.
We overruled or disapproved each of them after a circulation
to the full court under Circuit Rule 40. Unfortunately, Freedom
Group did not include Coppie in its list of defunct rulings. That
may be because Coppie was rarely cited until Creditmax found

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4 No. 22-1733
it; today’s opinion marks Coppie’s first citation by the Seventh
Circuit since its release 39 years ago.
Creditmax tries to distinguish Barnhill and Freedom Group
on the ground that they dealt with dates on which people
learned of transfer orders (for example, the date on which a
check arrived in the mail) rather than the dates the orders
were made or took effect. Yet the rationale of Barnhill does not
depend on a payment order’s entry versus the date any given
person learned of it. Under Barnhill both dates are irrelevant
to the “transfer.” Deferred knowledge of a transfer order may
affect priority among creditors, if something happened (say)
between entry of an order and notice to a person trying to
make a secured loan, but only the date of payment matters
when defining a transfer under §547.
Freedom Group did not purport to provide a comprehen-
sive list of all decisions undermined by Barnhill. It is enough
to hold today that Coppie must be treated just as Freedom Group
treated similar decisions. We know from Barnhill that federal
law defines “transfer” and that only actual payment counts as
a “transfer.” Coppie, which held otherwise in both respects,
accordingly is overruled, and the case is remanded with in-
structions to resolve the Trustee’s claim on the merits.

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