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3 min read

Capital One Sued to Obtain Return of Garnished Wages

Debtors, Paul E. Allen and Kelli D. Allen sued Capital One Bank to obtain the return of Mr. Allen’s garnished wages under an avoidable preference theory. After the wages were returned two weeks later, the Allens amended their complaint alleging Capital One willfully violated the automatic stay by “dragging its feet on releasing the garnishment.” The U.S. Bankruptcy Court of New Mexico decided upon Capital One’s motion for summary judgment based on its position that it “proceeded diligently.”


In February 2019, Capital One obtained a default judgment against Mr. Allen for $6,422.38. It applied for a writ of garnishment to be served via FedEx where he worked. The state court issued the writ in March 2019. A FedEx registered agent served the writ of garnishment and began garnishing his wages. A judgment on the writ and order to pay was entered in June 2019.

The Allen’s counsel notified Capital One’s state court attorneys of their bankruptcy. Capital One acknowledged the receipt of the email and filed a release of garnishment to the state court. Copies were sent to FedEx and the Allens. Capital One called FedEx several times to learn the garnishment had not been stopped. Mr. Allen’s wages were still garnished twice on August 9th and 16th of 2019.

The Allens sought to recover $2,907.39 in garnished wages from Capital One. On August 22, 2019, the state court entered Capital One’s release of garnishment on the docket. Mr. Allen’s wages were paid on August 23rd and on August 30th where he received a payment of the full amount that had been garnished. In September 2019, the Allens filed an amended complaint stating the claim of intentional violation of the automatic stay. They requested compensatory, punitive, and attorney fees.

Summary Judgment Standard

Courts grant summary judgment when the movant demonstrates there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. The court noted the case Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986) that stated “only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Courts view facts and draw reasonable inferences in the light most favorable to the opposing party when granting a summary judgment. The Allens did not dispute most of Capital One’s “Statement of Material Undisputed Facts,” leading the court to accept them as true.

Rule 56(d)

In response to Capital One’s motion for summary judgment, the Allens asked the court to deny or defer on the motion until it has addressed all discovery disputes. Fed. R. Civ. P. 56(d) To comply with Rule 56(d), a party must file an affidavit; identify the facts not available, their relevance, and what needs to be done to obtain them; explain why the facts precluding summary judgment cannot be presented; and state with specificity how time would enable the nonmoving party to meet its burden in opposing summary judgment.


The Court stated it would not rule on the Allens’ standing on its 11 U.S.C. § 547 avoidable preference claim because the garnished wages were returned. The § 547 claim was dismissed. It also held the Allens lacked standing to assert Capital One violated the automatic stay in connection with the garnishment of Mr. Allen’s prepetition wage. It noted In re Marquez, No. 7-12-11773 JA, 2013 WL 74606, at *1 (Bankr. D.N.M. Jan. 4, 2013) where “the court entered default judgments on the turnover portion of debtor’s complaint.”

Automatic Stay Violation

The Court noted an automatic stay goes into effect upon the filing of a bankruptcy petition. It gives debtors “breathing room” from creditors while they attempt reorganization. A garnishing creditor has the duty to release the garnishment of a debtor’s wages as soon as it becomes aware of a pending bankruptcy. Creditors must act within a “reasonable time” to stop a garnishment.

The Allens did not file an affidavit nor did they state whether they needed more discovery to respond to the motion. Instead, they stated more discovery is needed to support their claims against Capital One. The U.S. Bankruptcy Court found this inadequate under Rule 56(d).

The court noted both parties included several exhibits to their motion, response, and reply. It found the issues whether Capital One acted diligently to release the garnishment was well developed from the record presented. It concluded no additional discovery could alter Capital One mailed its release of garnishment to FedEx one day after bankruptcy was filed, Capital One took additional steps to obtain the release, nor that FedEx released the garnishment two weeks after the filing of the case. The U.S. Bankruptcy Court denied the Allens’ Rule 56(d) request.

The Allens complained Capital One should not have mailed the release of garnishment to FedEx at its Hobbs, New Mexico address. The court stated the complaint was not well founded. It noted the Hobbs address is the same one used to serve the writ of garnishment. The Bankruptcy Court concluded using this address “showed an effort to release the garnishment, not prolong it.”


The U.S. Bankruptcy Court held that the debtors could not withstand Capital One’s summary judgment motion. It found they “could produce no evidence Capital One was dilatory in releasing the garnishment.” In July, 2020, the court entered a summary judgment in Capital One’s favor. Bankruptcy can be a difficult process to go through on your own. If you find yourself in financial trouble and are considering bankruptcy, consider Whitcomb Selinsky PC to help you protect your assets.