What Is a Statement of Financial Affairs?

What is a Statement of Financial Affairs? Sounds pretty simple and harmless, right? Actually, it can be very detailed and complicated. If you have filed a Chapter 13 or Chapter 7 Bankruptcy, you have had to complete a Statement of Financial Affairs for Individuals Filing for Bankruptcy and, most likely, your attorney has stressed the importance of accurately answering all of the questions asked on the Statement of financial affairs.

What Does This Statement Consist Of?

The statement consists of only twenty eight yes or no questions. A "yes" answer requires elaboration. Therefore, this can be one of the most important and potentially dangerous portions of a Bankruptcy petition (dangerous if you do not answer the questions honestly and accurately). This is important because, as a Debtor, you will sign this document under Penalty of Perjury. That sounds serious, doesn’t it? Believe me, it is!

The exact statement you are required to sign with you file your statement of financial affairs states, “I have read the answers on this Statement of Financial Affairs and any attachments, and I declare under penalty of perjury that the answers are true and correct. I understand that making a false statement, concealing property, or obtaining money or property by fraud in connection with a bankruptcy case can result in fines up to $250,000, or imprisonment for up to 20 years, or both.” Now, I bet I have your attention!

This is another reason we recommend competent Bankruptcy counsel when filing your Chapter 7 or Chapter 13 who can help guide you through these questions to avoid any pitfalls. You can help your attorney by answering these questions honestly and to the best of your ability.

The Statement's Questions

By now, you are wondering “What are these important questions that, if I am not honest, could land me in prison?” The good news is that they are really not complicated questions.  Some questions are very easy, like what is your marital status (complicated is not a good response - this is not social media!), where have you lived for the last three years if different from your current address, did you have any income form employment or from operating a business during the current year or the previous two years.

How About Other Income?

This is where you really have to start thinking about other income. Sources include, but are not limited to: child support, alimony, social security, VA disability, workers compensation, unemployment benefits, etc. These all sound fairly common, but what about royalties, gambling winnings, money collected from lawsuits, dividends, etc.? Now, you really have to think about any money you have received over the last few years and answer honestly.

Payments to Creditors and Insiders

Some other questions on the Statement of Financial affairs focus on payments you may have made to your creditors or to an insider. So, what’s an insider? An insider is a friend or family member that you may have paid a lump sum for some reason. You are also required to list previous court actions or proceedings you have been involved in within a period of time. You must also disclose any gifts or charitable contributions up to a certain amount. You must list losses to include from disaster or gambling.

Transfers

One of the most important sections of this document is the section on Transfers. Here, you must divulge if you have sold or transferred anything, to include real estate and personal property, to anybody within a certain time period before you file your Chapter 7 or Chapter 13. This is a good spot to stop and say that if you are having money problems, it is NOT a good idea to sell or transfer property to try and resolve it before you seek legal advice.

There are additional questions for you to answer in detail if you own any kind of business, as well as questions about certain financial accounts. There are even, what I refer to as, some really wild questions about the environment--depending on where you reside those may have more impact on you than another person.

 

To sum up, none of the questions on the Statement of Financial Affairs are difficult to answer. Some may require more thought and documentation than others. It is important (and helpful to your attorney and yourself) for you to review these questions carefully and answer them with accuracy.

Money problems are not fun, but if you are suffering with them there are options to make the burden easier.  Our Attorneys can help you with those options and competently assist you with a Chapter 7 or Chapter 13 Bankruptcy Petition. I encourage you to reach out to our nearest office and let us help you through this process.