ORDER DENYING MOTION FOR RELIEF FROM AUTOMATIC STAY

CONTESTED MATTER

PAUL BAISIER, Bankruptcy Judge.

Before the Court is a Motion for Relief from the Automatic Stay and Waiver of 30-Day Hearing Requirement (Docket No. 42)(the "Motion") filed by 1st Franklin Financial Corporation (the "Movant"), on August 1, 2018. In the Motion, Movant seeks relief from the automatic stay of 11 U.S.C. § 362(a) to proceed with collection efforts, including the commencement of garnishment actions against Lucia M. Baker (the "Debtor"), regarding a loan obtained by the Debtor after the filing of the petition in this case (the "Loan").

The Debtor's Chapter 13 plan (the "Plan")(Docket No. 21) was confirmed by entry of an order on February 26, 2015 (the "Confirmation Order")(Docket No. 29). In the Motion, Movant states that the Debtor entered into the Loan on April 5, 2018. Movant also contends that the Loan was, at the time of the filing of the Motion, due for the May 5, 2018 through July 5, 2018 payments in the total amount of $615.00. Additionally, Movant asserts that, by virtue of the Loan, it holds an unsecured claim against the Debtor in the amount of $2,100.78 (the "Claim").

A hearing was held on the Motion on September 20, 2018 (the "Hearing"). Counsel for Movant appeared at the Hearing in support of the Motion, and counsel for the Debtor appeared in opposition. Counsel for the Chapter 13 Trustee was also present at the Hearing, but took no position on the Motion.

At the Hearing, Movant explained to the Court that the Debtor had initially obtained a "live check" loan on October 19, 2017 (the "Live Check Loan"). Movant also contended that, by the terms of the Live Check Loan, the Debtor, in obtaining such loan, affirmed that she was not involved in a bankruptcy proceeding. Movant asserted that the Debtor subsequently obtained the Loan to pay off the Live Check Loan and to pay medical bills. Movant also noted at the Hearing that the Loan was made to the Debtor on an unsecured basis. Movant contended that the Debtor did not inform it of her pending bankruptcy case when she obtained the Loan, but that it learned of the bankruptcy case through a search it conducted prior to filing a state court action to collect on the defaulted Loan.

All of the foregoing "facts," however, are simply contentions made by counsel for Movant. Movant did not put on any evidence at the Hearing, nor did it attach to its Motion copies of the purported documents for the Loan or the Live Check Loan. Consequently, the Court has no evidence as to the terms of the Loan or the Live Check Loan that purportedly preceded it. At the Hearing, counsel for the Debtor did concede that the Debtor took out the Loan after the filing of this case, that she is in default on the Loan, and that the Loan amount asserted by Movant is not materially incorrect.

In support of the relief sought in the Motion, Movant argued at the Hearing that this case is governed by Telfair v. First Union Mortgage Corp., 216 F.3d 1333 (11th Cir. 2000), in which Movant asserted the Eleventh Circuit held that a debtor's post-confirmation earnings are not property of the bankruptcy estate, but rather revest in the debtor upon confirmation of the Chapter 13 plan under 11 U.S.C. § 1327(b).1 Thus, Movant contended that, because the Debtor's postpetition earnings are not property of her bankruptcy estate, the automatic stay of 11 U.S.C. § 362(a) does not operate to preclude garnishment of such earnings. Movant also asserted at the Hearing that requiring it to be bound by the Confirmation Order would violate its due process rights because it did not have an opportunity to object to the Confirmation Order.

In opposition to the Motion, the Debtor argued that the automatic stay of Section 362 remains in effect as to the Debtor's postpetition earnings under 11 U.S.C. § 1306(a)(2) and the terms of her confirmed Plan, both of which provide that her postpetition earnings are property of the estate. Although the Debtor did not oppose the granting of stay relief to permit Movant to liquidate the Claim, the Debtor did oppose the institution of garnishment proceedings against the Debtor to collect on the Claim. In support of her position, the Debtor cited to In re Growth Dev. Corp., 168 B.R. 1009 (Bankr. N.D. Ga. 1994) at the Hearing for the proposition that the automatic stay applies to prevent garnishment proceedings against a debtor on a postpetition claim, such that a postpetition claimholder must obtain stay relief prior to instituting such proceedings.2

LEGAL ANALYSIS3

The answer to the question at issue in this case—whether Movant is entitled to commence garnishment proceedings against the Debtor's post-confirmation earnings—requires an answer to some subsidiary questions. First, is the property affected by Movant's proposed institution of garnishment proceedings, the Debtor's post-confirmation earnings, property of the bankruptcy estate? If the answer to this first question is "no," then the automatic stay of 11 U.S.C. § 362(a)4 does not apply, and Movant can proceed to liquidate the Claim and garnish the Debtor's post-confirmation earnings. If, however, the answer is "yes," then the stay of Section 362(a) applies, and we reach the second question—is Movant entitled to stay relief under 11 U.S.C. § 362(d) to institute garnishment proceedings against the Debtor's post-confirmation earnings?

I. Post-Confirmation Earnings & Property of the Estate

In determining whether the Debtor's post-confirmation earnings constitute property of the bankruptcy estate, two (2) statutory provisions are relevant: 11 U.S.C. § 1306 and 11 U.S.C. § 1327. Section 1306(a) provides that:

11 U.S.C. § 1306(a)(2). Section 1327 of the Bankruptcy Code outlines the effects of confirmation and states in relevant part, "[e]xcept as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor." 11 U.S.C. § 1327(b).

In construing these two (2) provisions together, many courts have identified a conflict regarding post-confirmation earnings when the treatment of such property is "not otherwise provided" for in a Chapter 13 plan or confirmation order. In such circumstances, like those of Telfair, supra, courts must determine whether post-confirmation earnings constitute property of the estate under 11 U.S.C. § 1306(a), or whether they revest in a debtor upon confirmation of the Chapter 13 plan pursuant to 11 U.S.C. § 1327(b).

In Telfair, the Eleventh Circuit addressed this tension by adopting the "estate transformation" approach. Telfair, 216 F.3d at 1340. Under the "estate transformation" approach, "the plan upon confirmation returns so much of that property to the debtor's control as is not necessary to the fulfillment of the plan." Id. (quoting In re Heath, 115 F.3d 521, 524 (7th Cir. 1997)). Accordingly, "only the amount required for the plan payments remained property of the estate." Id.5

Although a conflict can arise in construing §§ 1306(a) and 1327(b) with respect to post-confirmation earnings, as identified and resolved in Telfair, the language of the Confirmation Order forecloses such a conflict.6 Pursuant to the Confirmation Order, "[p]roperty of the estate shall not revest in Debtor until the earlier of discharge of Debtor, dismissal of the case, or closing of case without entry of a discharge, unless the Court orders otherwise." See Confirmation Order, Docket No. 29.7 This language makes clear that, until one of the enumerated events occurs, property of the estate does not revest in the Debtor upon confirmation. Because none of these events have yet occurred in this case, property of the estate has not revested in the Debtor.

Unlike in Telfair, the Confirmation Order here "otherwise provides" that property of the estate shall not revest in the Debtor upon confirmation. 11 U.S.C. § 1327(b)("Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor.")(emphasis added). Because the Confirmation Order contains a provision that affects the operation of 11 U.S.C. § 1327(b), the holding of Telfair and the "estate transformation" approach are inapplicable to this case. Instead, all of the Debtor's post-confirmation earnings remain property of her bankruptcy estate under 11 U.S.C. § 1306(a) and the Confirmation Order. Consequently, such earnings remain subject to the protection of the automatic stay of 11 U.S.C. § 362(a), such that Movant must seek relief from the stay to execute on the Debtor's post-confirmation earnings.

II. Relief from the Automatic Stay

Having determined that the Debtor's post-confirmation earnings are property of the estate, we must now turn to whether stay relief is appropriate. In that regard, the parties do not dispute that Movant does not need relief from the automatic stay to bring an action against the Debtor to collect on its postpetition debt. See In re Reynard, 250 B.R. 241, 244 (Bankr. E.D. Va. 2000)(explaining that Section 362(a) "does not prevent the commencement of a lawsuit to collect a post-petition debt."). Accordingly, Movant does not require stay relief to demand payment of its Claim, or to initiate a suit on the Claim and prosecute such action to judgment.8

However, "[t]he right to undertake collection activity, including filing a lawsuit, to collect a post-petition debt does not allow all collection activities." Id. (emphasis added). 11 U.S.C. §§ 362(a)(3) and (4) prohibit "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate[, and] any act to create, perfect, or enforce any lien against property of the estate," such that the commencement of garnishment proceedings against property of the estate would clearly implicate either subsection, and Movant would not be permitted to undertake such activities without first obtaining stay relief. Hence, in the absence of stay relief, Movant's "[r]ecourse is limited to property that is not property of the estate." Id. at 245.

To the extent Movant seeks to execute on property of the estate, relief from stay to permit that activity is premature at this stage of this matter, as Movant has no judgment upon which it can execute. Movant has not even initiated a lawsuit against the Debtor.9 As Movant seeks prospective relief to which it may never be entitled, the Motion is denied without prejudice as being premature.

Moreover, even the Motion were not premature, it would nonetheless be denied because Movant—in the Motion and at the Hearing—failed to establish a right to have the stay lifted pursuant to 11 U.S.C. § 362(d). Section 362(d) governs relief from the automatic stay of Section 362(a), and provides in relevant part:

11 U.S.C. § 362(d). With regard to stay relief under Section 362(d)(1), Movant, as the proponent of stay relief, bears the burden of proof to show that sufficient "cause" exists for lifting the stay. See Sonnax Indus., Inc. v. Tri Component Prods. Corp. (In re Sonnax Indus., Inc.), 907 F.2d 1280, 1285 (2d Cir. 1990)(stating that 11 U.S.C. § 362(d)(1) "requires an initial showing of cause by the movant" and if the movant "fails to make an initial showing of cause. . . the court should deny relief. . .").

The term "cause" is not defined in the Bankruptcy Code; rather, courts are left to determine in their own discretion what constitutes cause on a case by case basis. See Baldino v. Wilson (In re Wilson), 116 F.3d 87, 90 (3d Cir. 1997).10 Case-specific factors that aid courts in evaluating whether cause exists under Section 362(d)(1) include: "(1) whether the debtor has acted in bad faith; (2) the hardships imposed on the parties with an eye towards the overall goals of the Bankruptcy Code; and (3) pending state court proceedings." Disciplinary Bd. v. Feingold (In re Feingold), 730 F.3d 1268, 1277 (11th Cir. 2013)(internal quotations and citations omitted). With regard to the second factor, the Court "must compare the equities of freeing the creditor from the restraint of the automatic stay so that it may pursue its claim promptly in another forum against the impact that such relief is likely to have on the bankruptcy process." In re Irwin, 457 B.R. 413, 426 (Bankr. E.D. Pa. 2011).

As to the first factor, Movant has failed to adequately allege the existence of bad faith on behalf of the Debtor. Movant contends that the Debtor acted in bad faith by failing to disclose this bankruptcy case when she obtained the Live Check Loan and the Loan from Movant. There is no evidence, however, that the Debtor actually made any misrepresentation in that regard or that the Debtor acted intentionally in failing to disclose her bankruptcy (if she failed to do so). Moreover, Movant's lack of diligence impairs its ability to obtain any such finding. Movant is a creditor that regularly appears in this Court, and no doubt has online access to its records. That notwithstanding, Movant made two unsecured loans to the Debtor, apparently without first making in either case any inquiry to determine whether she was a debtor in a bankruptcy case.11 This abject lack of diligence would certainly preclude Movant from saying that it reasonably relied on any statements made by the Debtor,12 had it proved any such statements were actually and intentionally made. As a result, Movant has not proved that the Debtor acted in bad faith with regard to Movant.

Second, in balancing the hardships to the parties, the hardship to the Debtor if the stay is lifted far outweighs any hardship to Movant if it is not. Given the stage of the Debtor's case,13 it appears certain that garnishment of the Debtor's post-confirmation wages would impede the effective administration of the Plan. See, e.g., In re Screen, 2004 WL 6044672, at *2 (Bankr. S.D. Ga. May 20, 2004)(noting that "garnishment is also inconsistent with the notion of voluntary repayment underlying a Chapter 13 reorganization."). If Movant were permitted to institute garnishment proceedings against post-confirmation earnings, the Debtor's ability to perform under the Plan would be severely impacted, as she is required to dedicate all of her net disposable income towards repaying her creditors under the Plan. See 11 U.S.C. § 1325(b)(1)(B). Thus, "there is nothing left over for a creditor to seize that does not affect a debtor's ability to successfully complete the chapter 13 plan." In re Reynard, supra, 250 B.R. at 249.

According to the Debtor's sworn schedules, she makes approximately $2,500.00 per month. After expenses, she has $290.00 per month left over to dedicate to the Plan. All of those funds are being paid to the Chapter 13 Trustee under the Plan. Under Georgia law, Movant would be able to garnish 25 percent of the Debtor's net wages, or over $500.00 per month.14 No evidence was presented in the Motion or at the Hearing that the Debtor's current earnings exceed the amount necessary for her performance under the Plan by any amount, much less by over $500.00, such that garnishment of her earnings would certainly impact the Debtor's performance under the Plan. Thus, to permit garnishment of the Debtor's earnings would be prejudicial to the Debtor's reorganization in this case.

Conversely, the prejudice to Movant in keeping the stay in place is minimal when compared to the potential hardship to the Debtor if the stay is lifted. If the stay is not modified to permit Movant to garnish the Debtor's earnings, Movant will instead be required to wait until the earlier of: (i) completion of the Plan, (ii) closing of the case without a discharge, or (iii) dismissal of the case. According to the statements made by the Chapter 13 Trustee at the Hearing, the Debtor has approximately fourteen (14) months of performance remaining under the Plan. As Movant holds a postpetition debt not subject to discharge under 11 U.S.C. § 1328(a), it would have to wait, at the longest, fourteen (14) months for the Plan to be completed before commencing garnishment proceedings against the Debtor's earnings. At that time, the Debtor would have received a discharge of her other debts, would no longer be making the $290.00 per month Plan payment, and would own her vehicle free and clear. At that time, Movant could collect its roughly $2,000.00 Loan via garnishment at a rate of over $500.00 per month, such that full collection would only take a few months.15

Finally, Movant has—as of the Hearing—failed to initiate a lawsuit against the Debtor outside of this bankruptcy proceeding. The lack of a pending state court lawsuit also weighs in favor of keeping the stay in place.

As to stay relief under Section 362(d)(2),16 even if the Debtor does not have any "equity" in her post-confirmation earnings, such property is undoubtedly necessary for an effective reorganization of the Debtor as outlined supra. Pursuant to 11 U.S.C. § 1325(b)(1)(B), the Debtor must contribute all of her net disposable income to the Plan. If Movant were permitted to garnish those earnings, the Debtor's ability to reorganize would be severely impaired, as the successful completion of the Plan depends upon the Debtor's disposable income and ability to make Plan payments. Accordingly, because the Debtor's post-confirmation earnings are necessary to an effective reorganization in this case, Movant is not entitled to stay relief under Section 362(d)(2).17

CONCLUSION

In light of the foregoing, the Court finds that Movant has failed to demonstrate any basis under 11 U.S.C. § 362(d) that would justify lifting the automatic stay at this time. Accordingly, upon consideration of the Motion and the statements made by the parties at the Hearing, it is hereby

ORDERED that the Motion, to the extent Movant seeks to initiate garnishment proceedings against the Debtor's post-confirmation earnings, is DENIED without prejudice.

The Clerk is directed to serve copies of this Order upon the Movant, counsel for Movant, the Debtor, counsel for the Debtor, and the Chapter 13 Trustee.

IT IS ORDERED.