Author Archives: Mark Shmorgon

About Mark Shmorgon
Mark Shmorgon graduated from the University of California, Berkeley in 2004 with a BA in Political Science and Legal Studies. Later, Mr. Shmorgon earned his Juris Doctorate from Golden Gate University School of Law in 2007. During law school Mr. Shmorgon clerked at the Law School Library, where he gained invaluable research skills while assisting fellow students and faculty. Mr. Shmorgon also clerked for an immigration and qui tam federal false claims act law firms. After earning his JD, Mr. Shmorgon worked for three of the largest bankruptcy firms in the Sacramento region focusing in all aspects of consumer debt relief. Mr. Shmorgon was born in the former Soviet Union and immigrated to the United States at age six and was raised in Modesto, California. Mr. Shmorgon is fluent in both English and Russian and is voice and participant in the local Slavic community. He has appeared in Russian print media and newspapers as well as on local radio and TV stations speaking about bankruptcy and debt relief. In his spare time Mr. Shmorgon, enjoys spending time with his wife, traveling, skiing and working out. <a href="">Google</a>

Pesky Debts – Things to Consider

Like all things in life some debts are worse than others.  Many of us have heard that terminology before, one debt is better than another.  I want to devote some time to what I believe is the most difficult debts to get rid of.

The first one is the elusive timeshare.  Many of us may recall being invited to a free seminar, hotel room stay in Las Vegas, or enticed to come to a presentation in exchange for some kind of free gift.  As the saying goes, there are no free lunches in America.  What these generous sales people really want is for you to sign up for a time share.

A time share is essentially the right to use a vacation property or resort for a certain period of time.  Some are based on points.  So many points gets you certain locations, times, and perks.  Others are deeds where hundreds of people all own a small piece of some vacation property and each is allotted a certain amount of time to use the property.  What many consumers don’t realize is that not only does this time share cost money, some reaching upwards of $25,000.00; they also come with pesky maintenance dues that can range in the hundreds or even thousands of dollars per year.  So as long as you are an owner of a time share you will pay that maintenance fee for the rest of your life.  Many consumers don’t realize that while the time share may be nice on paper and comes with many destinations and room qualities, for the price of the time share and maintenance fees I bet a good travel agent or just hunting online can land you an equally nice vacation and hotel room for the same price or less, but on your own schedule.  If you find yourself trapped in a time share and want out, a bankruptcy can certainly get you out of the main debt.  However, until the time share deed or ownership is returned to the company the debtor remains liable for the maintenance dues.

My next topic concerns pesky secured debts for household goods.  For example, have you ever attended a lovely in home presentation where someone offered to sell you a $3,000.00 vacuum cleaner?  Of course, one must wonder why anyone needs such an expensive vacuum cleaner in the first place.  Similar to the vacuum cleaner lots of consumers also get really good store deals at rent to own centers, furniture stores, jewelry stores, and even musical instrument shops.  What most consumers don’t realize that if you fail to make payments on these secured consumer goods, not only will the creditor hound you for the funds, the creditor can even repossess the consumer goods you purchased.  Even under bankruptcy a debtor is forced to either continue making payments or return the items if they want the debt to discharged.  But a bankruptcy filing also allows the consumer to redeem or pay the market value of these consumer goods over a period of time or all at once.  Given the resale value of consumer goods, the amount that actually gets paid back can be quite small compared to what is actually owed or what the consumer good cost new.

Last but not least are student loans.  While these debts are advertised as good debts that invest in our or our children’s future and every payment will help build up your credit score.  While this is all true, when repayment is not possible there is little a bankruptcy filing can do to get rid of the debt.  As a matter of fact the law is so skewed in favor of the government, the holder of the educational note, that you just about have to prove that you are so permanently disabled that you will never be able to use your education to get a full discharge in bankruptcy.  If you are suffering from overwhelming student loan debt, I suggest you still give me a call as there are options we can explore both in and out of bankruptcy to provide short term or long term relief and in some cases even achieve complete forgiveness.  But given the complexity and variety of options that are out there, I strongly urge to come in for a free consultation

For those considering filing for bankruptcy for these debts or any other kind of debt you are welcome to call 916-640-7599 to setup a free consultation.  Likewise if you have questions or comments you can always write me as well at

Finally, I just want to remind my current clients, former clients, and perspective clients that as of July 2015 our office moved to 5015 Madison Ave. Sacramento, CA 95841.  Likewise if enjoy reading these articles and are interested in working and renting space in our building please feel free to contact me as well.  We have just one office out of seven available.  The office is approximately 200 square feet with both a street window view of Madison Ave, and your own private patio outdoor access.  For those interested please don’t hesitate to contact me for a viewing.  The asking price is $600.00 per month and still has that fresh paint remodel smell.

We've Moved!

As of July 2015, our office has moved to 5015 Madison Ave. Sacramento, CA 95841.  The office is located in the heart of the Russian speaking community near the intersection of Madison Ave. and Auburn Ave.  Our neighbors are Firestone to the right and Target to the left.  We are within walking distance of other fine Slavic businesses including Good Neighbor, Gastronom Kiev Market, Gabriel Travel, and Venice Furniture, just to name a few places that have been in the neighborhood much longer than we have.  The office should be easy to find with the large “Attorneys” sign in Russian on the front elevation as well as the One Day Bankruptcy logo on the side monument sign.WebsiteAfter many address changes in the past seven years, we are hoping this will be our final destination.  I started my bankruptcy career working for two of the largest Bankruptcy law firms in Northern California, first on Cadillac Drive from 2008 to June 2010 and then moving to G Street in downtown from to 2010 to 2012.  After gaining much experience during the peak of bankruptcy filings, I decided to start my own firm.  The firm officially opened July 2012 where I saw clients right out of my house.  For an entire year I met with clients inside my home to save on costs to allow me to open up my first real office the following year on Watt Ave.  There I worked and the business grew and thrived for an additional two years.  But the time has come where I needed to purchase my own office so that I can be fixed in one place for the remainder of my career and never have to worry again about rising rents or being asked to move because the landlord has a different use for the property in mind.

Over the years of I have helped thousands of clients, but I am especially thankful to those clients who braved into my house during that first scary year on my own.  I am thankful to the clients who took the time to find me during that early transition and those who migrated to my office despite having invested time and money into my former employers.  I am thankful to the clients who understood that I could provide better service to them on my own rather than hiring secretaries, paralegals, even when I had briefly interrupt our consultations to speak another client on the phone.

The move to 5015 Madison was not an easy one.  It took over a year to obtain the permits and to actually complete the remodel.  I am especially thankful to all the people that worked on the remodel to get it to completion.  Special thanks to my real estate broker and general contractor, Steve Becker; my plan designer Dasha Gusev; my two engineers: Andrey Yevtushenko and Andre Baranov, the window installers at Sacramento Windows, Inc; Artur Raileon for the window tinting, Dmitiry Latyuk for sheetrock, doors, and trim; Struk Construction, Inc, for the disabled access travel path, Tamara Domashuk for janitorial, Boris Karamalak and Nikolay for fence and cement work; Timofey Samusenko for the floors, painting, and fence work; Jeff Stewart for the signs; Jason Morrow spray foam insulation; Jose Ruiz blow in insulation; Wayne Bolt for the air conditioning and duct work; Dan Quinn for floor demolition, and my make shift crew of young men for general labor: Alex Kukhta, Alex Andreyev, Andrey Kalugin, Ivan Dragni, Julian Kozmo, Oleg Shevchenko, and Ricky Macaluso.    Of course, last but not least, I am grateful to my father, Arkady Shmorgon who did all the electrical work free of charge.  He worked at my project while holding down a full time paying job at Gallo Winery in Livingston, CA.  He also pushed forward and helped despite undergoing a partial knee replacement surgery at the start of the year.

For those considering filing for bankruptcy or just want to stop by the new office you are welcome to call 916-640-7599 to setup an appointment.  If you are interested in leasing office space we still have few places available so feel free to give me a call as well.   If you have questions or comments you can always write me as well at

Bankruptcy and Government Benefits

Many potential bankruptcy clients that I encounter these days have not only lost good paying jobs, but are also receiving government benefits.  Clients often ask, “what will happen to my government benefits if I file for bankruptcy?”  Others come to me with a much different problem, and ask “if bankruptcy can discharge their benefit overpayments?”  Lastly, many clients ask how will their bankruptcy effect unrelated financial benefits such as immigration benefits or the ability to get a business license or construction bond.

Let’s the start the discussion by listing the most benefits that many clients receive to supplement their low income.  If you have recently lost an official job where you were paid a W2 wage, you are entitled to unemployment compensation.  The amount you receive depends on your highest average gross earning quarter in the last five quarters.  Then there is a specific formula that figures out your weekly compensation from $40.00 up to a maximum of $450.00 per week.  Currently the maximum period for receiving unemployment benefits from the state of California is 26 weeks.  Clients also receive short term and permanent disability from the Social Security Administration if they become disabled or go on maternity leave.  Yet others who were specifically injured at work receive worker’s compensation benefits.  Again the amount received is based on your overall earnings and how much you paid into the system.  Others receive benefits via the California Electronic Benefit Transfer which is typically food and cash welfare benefits.  Food benefits are federally authorized benefits that can be used only to purchase food and non-alcoholic beverages.  Food benefits are distributed through the Supplemental Nutrition Assistance Program (SNAP), formerly the Food Stamp Program. Cash benefits include state general assistance, Temporary Assistance for Needy Families (TANF) benefits, and refugee benefits.  The amounts receive here depends on your income and family size.  Last but not least are all health care benefits from Medi-Cal and others.

Perspective bankruptcy clients should rest assured that none of the benefits listed above can be lost for filing bankruptcy.  Likewise if you are in the process of receiving your benefits or are expecting a large lump sum payout for any of these benefits, these are all exemptable assets that are fully protected and cannot be turned over to your creditors upon filing for bankruptcy.  Therefore upon filing your benefits and perspective claims for benefits will continue as usual and you have nothing to worry about.

Sometimes clients wrongly receive the benefits listed above, whether it was because they were never eligible or failed to report a change of income or circumstance after receiving their benefit.  For example, if you lost your job and are receiving unemployment compensation and then find employment but fail to report the job, you will eventually get a bill for the benefits that were overpaid.  Not only will you owe the amount that was overpaid with interest, but the agency will hit you with a 30% penalty for the amount wrongly paid out and it will have to be repaid or will be offset from your future benefits.  Elderly and disabled clients have run into situations where they owe for Social Security benefit overpayments and even needy families on food stamps and cash aid that have returned to work and failed to report the change in income have been hit with benefit overpayment bills.

Luckily, again the majority of these benefit overpayments are dischargeable in bankruptcy, with one notable exception: welfare benefits based on minor children.  If the basis of receiving food stamps and cash aid was due to your minor children, then such a benefit is tantamount to receiving a domestic support obligation, i.e. lumped into the same category as child support and therefore deemed non-dischargeable in bankruptcy and receive a priority status that can only be repaid in full in our outside of bankruptcy.

Finally many clients ask whether during or after their bankruptcy if they can get immigration benefits, a business license, or a construction bond.  The answer is a positive yes on all fronts.  Immigration and bankruptcy have no connection at all.  Bankruptcy is a civil matter that does not effect your ability to receive citizenship or sponsor other family or work based immigrants to the United States.  As a matter of fact the word bankruptcy is not once mentioned in the Immigration Nationally Act (INA).

There is also no connection between bankruptcy and business license applications.  So if you are applying for a child care license, contractor’s license, commercial driver’s license, or general business license, the application process does not have any mention or practical need to know about any past, present, or future bankruptcies.  However, when it comes to getting a construction bond, you will receive one despite your bankruptcy, but the rate may not be as favorable.

If you are contemplating bankruptcy and have further questions about benefits, how they can be protected, and how to discharge your overpayment don’t hesitate to call Mark Shmorgon at 916-640-7599 or write him at

Common Mistakes When Filing for Bankruptcy

There are three things that all debtors who are contemplating bankruptcy should strive avoid prior to filing: (1) obtaining or using credit with no intent to pay it back; (2) preferential payments; and (3) voidable transfers.  My goal in this article is to briefly explain the origins of these concepts, why they are harmful to your bankruptcy, and what can be done to alleviate the damage that may have already been done.

The first and most common mistake is obtaining or using credit with no intent to pay it back.  For example, a few days prior to your bankruptcy you max your credit cards with purchases of jewelry, vacations, and cash advances totaling several thousand dollars.  When this happens the harmed creditor can file an adversary proceeding prior to your discharge, wherein the creditor will seek an exception to your discharge in regards to its specific debt.  The bankruptcy code specifically states under 11 U.S.C. §523(a)(2) that a discharge does not discharge an individual debtor from any debt for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by false pretenses, a false representation, or actual fraud.  The code later defines consumer debts owed to a single creditor and aggregating more than $500.00 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and cash advances aggregating more than $750.00 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable.

So what all this means is that if you charge up more than $500.00 for luxury goods or take a cash advance in excess of $750.00 within 70 days of filing it is presumed to be non-dischargeable.  From an evidentiary stand point it is typically very difficult for a creditor to prove fraud and even harder to prove intent.  But when the above mentioned dollar amounts are exceeded the creditor no longer needs to prove anything but rather the debtor now must disprove the allegation.  The moral of the story is be careful when charging large amounts of money just prior to bankruptcy, but if you do, get ready to explain why your purchases were life necessities rather than luxuries or that your intent was never to defraud anyone but rather you had a life emergency such unemployment, sickness, or a divorce just to name a few.

The second most common mistake prior to filing for bankruptcy is making a preference payment.  While preference payments do not hurt the debtor, they do hurt the recipient of the preference which often a very close friend or relative of the debtor.  11 U.S.C. §547(b)(4)(B) provides that the trustee may avoid any transfer of an interest of the debtor in property made within one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider.  An insider is defined as the debtor’s friend, relative, or business partner.  For example suppose the debtor owed $10,000.00 to a credit card, $5,000.00 for a personal loan, and $1,000.00 to his parents.  Then within one year of bankruptcy that same debtor pays off his parents in full and still owes for the credit card and personal loan.  Under this scenario the trustee would move to recover the funds from the preference receipt, i.e. the parents, and then proceed to evenly distribute the recovered $1,000.00 evenly to all three creditors distributing in accordance to the percentage of the debt that each owed.  The credit card would receive be $625.00, the personal loan would get $312.50, and parents would get back just $62.50.  To avoid this problem I encourage all debtors to either not make preference payments in the first place or if they already had, to unwind them themselves, file the petition, and then pay off the insiders post filing.

Lastly, some debtors make the mistake by completing voidable transfers, otherwise known as fraudulent transfers.  For example, if you give away or sell your new car for significantly less than it is worth to a sibling before filing, in order to shield it from your creditors.  While some transfers may seem to be innocent on the surface or perhaps performed when you were not even thinking of bankruptcy, the trustee, nevertheless has up to two years to avoid and reverse any such transfer.  Once again the consequences of a voidable transfer are suffered by the recipient of the transfer.  Like in the preference scenario above, the trustee again can unwind the transaction and then liquidate the recovered asset, and then distribute those proceeds to your unsecured creditors.  The recipient on the other hand would receive any funds paid for the avoided transfer and in the event of a gift would be totally out of luck.  If you are thinking about bankruptcy and are worried that you might have inadvertently created a voidable transfer scenario please give me a call so we can discuss. I can answer your questions, help you with lawful pre-bankruptcy planning, and manage any issues that come up along the way.

To learn more about how to avoid these mistakes in bankruptcy and many more, please call Mark Shmorgon at 916-640-7599 or write him at

Tax Season

April 15, 2015 is the official deadline for your personal income taxes.  For many taxes are a time of joy as an extra bundle of income is about to arrive from the federal and state government.  For others it is time of horror and sorrow as to how they will pay their taxes.  Statistically speaking 54 percent of all Americans expect to get a tax refund and 24 percent say they owe money.  Overall, 30 percent of Americans intend to pay down debt with their tax refund.  On the other hand, 40 percent of those who believe they owe taxes say they are not prepared to pay up. Nevertheless, only 6 percent plan to borrow money, though 17 percent say they intend to set up an installment plan with the IRS.

With these deadlines and statistics in mind I want to spend some time discussing how taxes both refunds and debts interact with bankruptcy.  For bankruptcy purposes a tax refund is both an asset and income.  It is an asset because prior to receiving it you are owed the funds.  Although taxes are due on April 15, 2015 the majority of the events that triggered that refund occurred in the prior year and therefore a tax payer who is owed a refund is owed one long before tax season ever begins.  For Chapter 7 bankruptcy purposes it is important to note that tax refunds that have yet to be received are an asset of the estate and must be listed and exempted in order to protect them and keep them out of the hands of creditors.  The tax refund can only be protected under the wild card exemption which is only available to debtors who are not protecting equity in a residence.  For those contemplating filing a bankruptcy it is very important to double check that the tax refund is covered otherwise it is best to wait until the refund is received and then proceeding with the filing.  Since the debtor controls when the bankruptcy is filed an incorrect filing can be a very expensive mistake.

For Chapter 13 purposes a tax refund whether due for over withholding on your paycheck, child or earned income credits, education credits, or any other credit that resulted in a refund is considered income.  For those contemplating a Chapter 13 bankruptcy it is important to understand that if tax refunds are consistent they must be considered as income for the purposes of one’s budget or risk once again turning over your refund for the benefit of your creditors.  Here is the improper listing of the budget could cost the tax payer between three to five years of tax refunds.

Since statistically 30 percent of those getting refunds plan on paying down debts it is important to consider filing for bankruptcy rather than paying down those debts.  If you can eliminate all of your debt with your tax refund, it is one thing, but if you are only going to put a small dent in the overall size of your debt it may be wise to consider filing for bankruptcy to eliminate all of the debt and still have plenty of the tax refund left over for other expenses.

For the 40 percent of you who not only owe taxes but have no clue how you are going to pay them, I strongly encourage you to speak to me.  Especially before you setup a an installment plan with the IRS or even worse borrow from friends and family to pay off the tax collector.  Bankruptcy is a very powerful tool when it comes to taxes.  Like all other creditors, the automatic stay that is created upon filing a case also applies to the taxing agency whether federal, state, or local.  Not only will a bankruptcy stop the IRS from seizing future tax refunds, it will also eliminate all wage garnishments and bank levies.

Taxes that are at least three tax sessions old, have not be assigned a lien, were filed on time, and were not assessed as a result of fraud or willful evasion can be discharged in bankruptcy like any other unsecured debt.  More recent taxes carry a priority status and do not have that status.  However, priority taxes, those due in the last three tax seasons can through the help of a Chapter 13 be managed as well.  A Chapter 13 allows the debtor to setup a repayment plan for up to five years with no interest or penalties.  Secured tax liens can also be eliminated or reduced under Chapter 13.

Therefore I encourage anyone considering bankruptcy to talk to me if they are worried about either getting a tax refund or owing a tax debt.  Likewise if you are already on a payment plan with the IRS or have unresolved tax debt I will be more than happy to sit down with you for a free consultation to see if bankruptcy is a viable option in resolving your taxes in a quicker, cheaper, and more efficient way.  If you have questions you can always write me at or call me to schedule a free consultation at 916-640-7599.

So You’re Being Sued

Very often I get a phone call from a terrified client who is being sued in state court.  The client typically wants to see me that same day and has millions of awful thoughts running through his or her head as to what is going to happen next.   Lets back track a little bit first.  How did we get this far and why does someone get sued?  Prior to the filing of any bankruptcy, a creditor’s remedy to collect on any unpaid debt is to file a complaint in state court in order to get their debt reduced down to a legally enforceable judgment.  The judgment is needed in order to legally enforce a collection action and actually collect against someone’s will.

For example, suppose someone owes money to a credit card, hospital, a landlord, or a furniture store.  A creditor wanting to collect on any of these debts will first utilize direct communication with the debtor by calling about the debt and / or sending letters demanding the debt be paid.  When these efforts fail, the creditor can assign, transfer, or sell the debt to a collection agency to try the same thing.  While this step is not required it is often done by major financial institutions in order to clear an account from their books.  Most major institutions want to only hang on to accounts that are less than 180 days delinquent.  Once the debt is transferred, sold, or assigned to collections the original creditor will report the account as “charged off”, which is a serious negative connotation on your report.  The last step for either the original creditor or the collection agency that has possession of the original debt is to file a lawsuit.

A lawsuit commences with the filing of a complaint and summons in state court.  The complaint lays out the accusations against the debtor.  Typically breach of contract and money damages for that breach. In the case involving furniture or a landlord, the creditor will also ask for possession of the furniture or premises.  The debtor typically finds out about the lawsuit when he or she gets served.  Services of process is typically done by an uninterested third party which can be a hired process server or even the sheriff’s office.  This means someone will come to your residence or your place of work and directly hand the summons and complaint to you.  The process server will then file a declaration with the court stating that debtor was served.  This process can be scary, embarrassing, and often times incite anger.

Once you have been served you have 30 calendar days to file a response to the lawsuit or just 5 calendar days in the case of an eviction for unpaid rent to the landlord.  The time period is very crucial; because once the deadline passes the creditor can file for default judgment.  Often times clients are surprised as to why the case against them was never heard in court or why they never got to tell their story to a judge.  The usual answer is because the debtor failed to timely respond.  With a judgment in hand a creditor can then proceed to enforce that judgment by either having sheriff withhold 25% of your net paycheck, levy the entire contents of your bank account, replevin (take control of your furniture), or eviction (forcefully remove you from your tenancy) to satisfy the debt obligation.

The good news is that a bankruptcy filing will put on hold all of these actions and if done quickly enough can even reverse some of the damage already done.  A bankruptcy filing will make the judgment unenforceable.  It will prevent the sheriff from taking your wages, levying your bank account, repossessing your furniture, or evicting you from the property during the pendency of your bankruptcy.  But do keep in mind that you will have to eventually catch up your rent or move out and likewise return your furniture or pay for it under a new agreement enforced by the bankruptcy court.

A common misunderstanding about lawsuits and their enforcement is known as the statute of limitations.  It is true that most debts can only be reported for seven years on your credit report and a lawsuit can only reach judgment if the debt is less than four years old.  However, it is your responsibility to enforce these rules.  A credit reporting bureau can always erroneously report a debt older than seven years and you will have to initiate a dispute with the credit reporting bureaus to get that account remove.  Likewise a creditor can still sue you for a debt that is older than four years and you will have to hire an attorney and pay a filing fee to prove the account is older than four years and the lawsuit must be barred by the statute of limitations.

With that in mind it is often cheaper and quicker to file a bankruptcy rather than to fight the lawsuit in state court.  So if you are being sued or just got served and don’t know what to do, know that there is help available.  Just contact Mark Shmorgon at 916-640-7599 for a free bankruptcy consultation or write him at

Commercial Trucking Through Bankruptcy

Over the last several years I have had well over one hundred truck drivers as clients.  I have grown fond of these clients and have noticed many common issues and problems develop in their cases.  Today I want to go through the various issues a self employed truck driver might encounter before, during, and after filing for bankruptcy.

The majority of truckers have filed for Chapter 7 bankruptcy and have collectively discharged millions of dollars in unsecured debt.  Most of my readers are well aware of the benefits of bankruptcy so my focus is going to be on how to operate a truck driving business while in bankruptcy.  The most basic scenario involves a trucker who is a true W2 employee and gets paid via payroll on an hourly or by mileage scale.  In this case the trucker is just the driver and simply earns a wage.  In this scenario nothing special occurs before, during, or after the bankruptcy.  The next group of truckers do exactly the same work as the W2 payroll truckers but instead are considered self-employed truckers and receive a 1099 at the end of the year for their hours or mileage.  This group of truckers only needs to provide proof of license and insurance in order to operate during bankruptcy.

My next and more complicated group of truckers are self employed owner operators who own or are financing their trucks and trailers.  The bankruptcy code states that a debtor cannot operate a business while under Chapter 7 unless that business is either run by the trustee or is abandoned back to the debtor.  In this most common scenario, a skilled attorney will immediately contact the trustee upon filing of the bankruptcy, provide proof of insurance and license, and proceed to file a motion to compel abandonment to be heard on the first available court calendar.  Failure to do so can very often lead to the trustee shutting down the trucking business until the conclusion of the case which can be 90 to 120 days later.  Such a scenario would devastate anyone who derives their income from trucking.   Again, attorney Mark Shmorgon can not only file your bankruptcy in one, day but also file the appropriate motions with equal speed to ensure a smooth bankruptcy processes.

For those that own their trucks and trailers outright, the next issue is the value of the truck and trailer.  It is very important to correctly identify the make, year, model, mileage and condition of the commercial vehicles in questions.  As a business debtor in bankruptcy you are allowed to keep and exempt approximately $37,000.00 worth of assets assuming there is no equity in real property.  With that in mind, the value of the vehicle in question is very important to know in the beginning.  If the value of the truck and / or trailer appear to exceed this amount the trustee will want to have an auctioneer independently examine the vehicles, thus creating our first inconvenience.  If the auctioneer believes the value is higher than what was listed in the bankruptcy schedules and the amount cannot be exempted, the trustee will offer the debtor the opportunity to buy back the unexempt / unprotected equity.  If the debtor still disagrees with the value the trustee will then seize the vehicle in question and attempt to sell it.  If the trustee fails to sell it above the exempt value he will return the vehicle, if he succeeds he will pay you your claim exemption.  Either scenario is no good, since it leaves the trucker without a truck for many months.  However, if in advance, we know that value will be an issue it is smarter to file a Chapter 13 bankruptcy wherein none of your assets are taken, but instead you pay back the unexempt equity over five years and continue to operate your business without the fear of a shutdown or losing your core business assets.

Lastly, for the truckers who are financing their trucks there is a lot of benefit to be had under Chapter 13 Bankruptcy.  Under Chapter 13 bankruptcy the interest rate and principal of the truck and / or trailer can be modified to market value.  For example, I have had several truck drivers last year who came to me complaining that they lost so much time and money constantly repairing their old truck.  Likewise other truckers constantly fear the always changing and spotty enforcement of California Smog laws concerning their truck and reefer emissions.  In such scenarios I actually suggest that the trucker go out and purchase a new truck or trailer.  I get a lot of hesitation from trucker clients because they fear that the interest rate will be very high and they will not be able to afford the payments.  It is at that time that I remind my clients that as soon as we file for bankruptcy that typically high commercial interest rate loan of 10-20% will instantly be modified down to 4.5% over 60 months.  Once my clients realize that the amount of time and money they will save by no longer having to incur repair costs, upgrade anxiety, and down time, the majority actually make more money buying a new truck and filing for bankruptcy shortly thereafter.  There is a common misconception that purchasing a vehicle prior to filing bankruptcy is in some way illegal.  Rest assured there is nothing illegal in this transaction as the purchase is both necessary and the vehicle is still going to be repaid, just not at that high interest rate.

Another group of truck drivers have already purchased their trucks and / or trailers and they owe more on their truck then it is worth and again their interest rate is well above 4.5%.  In such a scenario for several clients, I was able to reduce the principal and interest rate on their truck and / or trailer payments which cut their monthly payments in half.  With a reduction on monthly payments they were finally able to live comfortable and enjoy many of the forgotten joys of life.

If you are truck driver and you are strongly considering purchasing a new truck or struggling with your existing truck payments, or struggling with your other debt obligations, don’t hesitate to contact Mark Shmorgon at 916-640-7599 for a free bankruptcy consultation or write me at



Every bankruptcy has three parties: Debtor, Trustee, and Creditor.  The creditors are typically the entities or people that brought us to bankruptcy in the first place.  If we had the ability to pay them there would be no reason to contact a bankruptcy attorney.  Creditors can be grouped into three categories: Secured, Unsecured, and Priority.  On top of that creditors also get a classification of dischargeble or nondischargeable depending on the origin of the debt and what effect the bankruptcy discharge will have on it.

Secured creditors are those that financed some sort of collateral that the debtor is holding; most commonly a mortgage, car payment, jewelry, or furniture purchase.  Secured creditors must be paid off in full if you want to keep the collateral.  The bankruptcy code allows you to modify some secured creditors to unsecured status like second mortgages in lien strips, or to partially modify them in vehicle loan cram downs wherein you will pay only market value of the vehicle as secured and treat the remaining balance as unsecured.  Secured debt can be discharged in bankruptcy but the collateral must be returned or the debt must be paid back in full or partially depending on whether you qualify for a cram down or an all out strip off of your secured loan.

Unsecured creditors don’t have any collateral attached to the debt.  Therefore this typically includes credit cards, medical bills, deficiency balances on houses, vehicles, rentals, old taxes, and even student loans.  A majority of unsecured debt is always discharged in bankruptcy and none has to be paid back.  However, some unsecured debt automatically get the classification of non-dischargeble: student loans, fresh taxes and unfiled taxes, unlisted creditors in asset cases, child support and alimony, governmental fine, penalty, or forfeiture, driving under the influence (DUI) related death or personal injury, non-dischargeable debt from a prior bankruptcy, some home owner’s association dues, and criminal restitution.  These types of debts can never be discharged in any type of bankruptcy.  There are four more types of unsecured debt that can be considered non-dischargeable but require an adversary proceeding, in other words, a lawsuit within your bankruptcy to prove up the non-dischargeable status.  These categories are: debts incurred (1) by fraud, (2) by defalcation / fraud in a fiduciary capacity, (3) as a result of willful and malicious conduct, or (4) as property settlement in domestic relations cases.

Lastly, priority creditors are fresh taxes (last three years) and child support.  Priority means they too cannot be discharged in your bankruptcy but they are basically considered more important than other debts.  Priority creditors help lower your disposable income for means test calculation purposes because these are debts that must be paid back and count as a valid expense going forward, meaning that high earners can still qualify for a quick Chapter 7 bankruptcy.  In an asset liquidation Chapter 7 case, priority creditors get paid ahead off all others, which is important because you want the debts you can’t discharge to be paid if you are electing to have some of your assets liquidated.  Priority creditors can also be a burden in terms forming a feasible repayment plan because those debts must be repaid in full in any Chapter 13 reorganization plan.  So a debtor who has an insurmountable amount of child support or tax debt can find it impossible to fund a Chapter 13 plan because all of that debt must be repaid back in five years or less under the longest allowable Chapter 13 plan.

It is always advisable to meet with a competent bankruptcy attorney to discuss your creditors, how they are classified, and to figure out how you can get rid of them.  The type of creditors one has will dictate which Chapter of bankruptcy makes the most sense and will also establish realistic expectations of what debts will be discharged and which debts can cause potential pitfalls in the future.

Chapter 13 Bankruptcy Trustee

Chapter 13 Bankruptcy Trustees are known as standing trustees because they are going to be part of your case for 36 to 60 months.  There are only two Chapter 13 Trustees in our Eastern District, Sacramento Division who together annually handle over $100 million dollars worth of payments.  In contrast there are over a dozen Chapter 7 trustees in our district who rarely liquidate assets or pay anything to creditors.

Many of the same basic principles that are common with Chapter 7 trustees also apply to Chapter 13 trustees.  When a Chapter 13 petition is filed it lays out the debtor(s) income, monthly expenses, assets, and debts.  Based on your income and expenses, the debtor also proposes a payment plan to repay all or some of his or her creditors during the life of the bankruptcy.  After your case is filed, verification paperwork such as tax returns, bank statements, and pay advices need to be sent to the Chapter 13 so he can approve your plan for confirmation.

The main duty of the Chapter 13 trustee is to check for Eligibility, Feasibility and Good Faith of your plan.  An eligible individual(s) who may file under Chapter 13 has two requirements: regular income and the $383,175.00 debt level for unsecured debt and $1,149,525.00 for secured debt.  These limits will adjust up again in April 2016.  Regular income has been determined to be any form of income, even unemployment benefits, worker’s compensation benefits, or other government benefits.  It is not necessary to have wage employment or be self employed to file for Chapter 13.

Feasibility of a plan has two aspects: arithmetic and liquidation.  The trustee’s job is to make sure that the plan you propose actually calculates out arithmetically.  For example if you propose to pay a $20,000.00 car note through your sixty month plan, but only propose $100.00 a month, the trustee will not have sufficient funds to pay off the note.  Likewise, a Chapter 13 is not a liquidation bankruptcy so the trustee has no power to take and sell your assets to satisfy the claims of creditors.  Instead, if you have unexempt or otherwise unprotected assets that would be subject to liquidation under Chapter 7 then your plan must pay an amount no less than that which the unsecured creditors would have receive under Chapter 7.

Good faith is a test which allows the Court to confirm a plan if “the plan has been proposed in good faith and not by any means forbidden by law”.  11 U.S.C. §1325(a) (3).  Although the bankruptcy code does not define good faith, our courts have established several criteria as to what is and is not good faith.  The court looks to the honesty of intention and as long as the debtor is open, honest, and plays fair with all creditors after filing the debtor meets this test.  For example, if you propose a plan wherein you are going to keep paying for a $40,000 luxury boat but pay nothing to your unsecured creditors, the trustee will object on good faith grounds because this boat is not necessary for your reorganization and it is unfair that you get to keep a luxury item at the expense of your unsecured creditors.

Like a Chapter 7 trustee the Chapter 13 trustee also conducts a meeting of creditors wherein the focus is not only on your assets, but also at your income and expenses and your ability to make future plan payments.  From the onset of your case the Chapter 13 trustee begins distributing the funds to your creditors in accordance with the terms of your proposed plan.  Since it takes three to five years to complete a Chapter 13 plan, the trustee is charged with receiving your payments and paying them out to your creditors until your plan is completely paid off.  During this time, the trustee must also keep an accounting of all monies received and how much has been paid out to each creditor.

Finally, the Chapter 13 trustee only pays creditors based on claims and the trustee along with the debtor are charged with the responsibility to review claims of creditors for payment and objecting to any claims that are not filed properly, or that do not have sufficient documentation to support their claim.

Chapter 7 Bankruptcy Trustee

Every bankruptcy case has three parties: debtor(s), creditor(s), and trustee.  A trustee in Bankruptcy is a person who is appointed by the United States Department of Justice or by the creditors involved in a bankruptcy case.  Although creditors rarely participate let alone appoint a trustee in a typical consumer case.

When a Chapter 7 case is filed a bankruptcy estate is formed.  The bankruptcy estate consists of everything the debtor owns at the time of filing including all personal and real property as well as equitable and contingent interests in legal claims and property such as insurance claims and even divorce settlements.  The bankruptcy estate also draws in all community property even if only one spouse files.  Because under California law all property acquired during marriage that is not a gift or an inheritance of one spouse is considered community property and hence indivisible until death or divorce.  The bankruptcy estate, however, is limited to those assets and interests the debtor(s) had on the day of filing, with the only exception being an inheritance, property settlement, or divorce settlement that comes in within 180 days of filing.  Therefore, if get a big raise, start a business, get a big tax refund in future years, become a reality star, or win the lottery post filing, those items are all yours free and clear of any creditor claims that were discharged in your bankruptcy.

The overarching duty of the chapter 7 trustee is to collect and liquidate the property of the estate and to distribute the proceeds to creditors.  This statement may sound very scary in a vacuum, however, very few cases actually have a liquidation, because most of the assets that the majority of debtors have are typically exempt from liquidation.  When you file for bankruptcy my job as your attorney is to prepare and submit your petition along with other papers with the court disclosing your personal and financial information.  Your bankruptcy papers include information about your income, assets, debts, and the state of your financial affairs.  In addition to filing your papers with the court, I must send the bankruptcy trustee certain documents such as pay stubs, tax returns, and bank statements that verify the information listed in your schedules.  It is then the trustee’s job to review your bankruptcy petition and verify the information and calculations using your financial documents and other independent sources.  For example, if you state that you make $4,000 a month in your bankruptcy papers, the trustee will compare that against your paystubs to make sure the figure is accurate.

Approximately a month after you file your case, my client(s) and I will attend a hearing in front of the bankruptcy trustee.  This is called a §341 meeting of creditors because your creditors are free to come and ask you questions during the hearing.  In my experience creditors only come to the hearing if they feel that you are hiding assets, committed fraud in obtaining the debt, or if the creditor is a lay person such a family member, former business partner, or an ex-spouse who does not understand his or her rights and is there to complain about your fresh start and the unfairness of them about discharge of his or her debt.  The bankruptcy trustee’s job is to conduct the hearing and ask you questions while you are under oath about the information contained in your bankruptcy documents.  The entire process when creditors are not present typically lasts between two to five minutes and the trustee routinely goes through ten to fifteen cases per hour on the hour.

Lastly the trustee is given certain powers in order for him to act as a fiduciary to the bankruptcy estate.  In other words to be fair to both you and your creditors.  For example, the trustee is able to avoid preferential and fraudulent conveyances.  Most commonly avoided preferential payments are those debts that were paid back to family members within a year of filing; payments to unsecured creditors in excess of $600.00 in the 90 days prior to filing; and the sale, mortgaging, or transfer of assets within 2 years of filing where little to no consideration was given for the debtor’s interest.  When the trustee exercises his avoidance powers the transfer, sale, payment, or lien is undone and the amount collected is then distributed evenly to all creditors in accordance to their preference order.  Here at OneDayBK my job is guide you through this process to make sure you get through the process as smoothly, quickly, and reasonably possible under circumstance.