Bankruptcy Statement of Financial AffairsWhat does a SOFA have to do with bankruptcy? Part of the required paperwork is called the Statement of Financial Affairs or SOFA. The SOFA is a series of questions that must be answered. This is where everything that has not already been provided in the petition and schedules is listed.

The first page of the SOFA gives specific instructions. The first few questions deal with income. Unlike Schedule I which is for current monthly income or the means test which looks back six months, the SOFA asks for your year to date income and the past two years of your income. It asks for wages and money from business as well as all other income. All other income includes annuity payments, interest income, rents, investment income, unemployment compensation, worker’s compensation payments, spousal support, child support and lottery winnings to name a few.

The next are questions about debt payments. If the bankruptcy consists of mainly consumer debts, then any payments made in the 90 days prior to filing that equal or exceed $600 must be disclosed here. These are considered preference payments and the Trustee can choose to go after return of the payments and divide them among the other creditors. All payments to insiders, like your family members, made within the past year must be listed. If you are married and filing a sole petition you must also account for any payments made by your spouse. If significant payments have been made to family members and none to other creditors then it is wise to wait until one year has past to file a bankruptcy. Otherwise there is a very real risk that your relative will be sued by the Trustee for return of the payments.

Repossessions, foreclosures and returns are also listed on the Statement of Affairs. All assignments, receiverships, transfers and set-offs are also listed and fully described. The bargain you make when filing for a bankruptcy is full disclosure of your entire financial picture in exchange for discharge of all dischargeable debts.

If anyone has sued you, there is a place to put the case information including case caption, case number and court. Any garnishments and repossessions are also listed.

Gifts to an individual or charitable contributions in the past year must also be listed with a few exceptions. All losses from fire, theft and gambling in the last year are described.

Payments to your attorney and for the credit counseling course are listed.

If you have a safe deposit box the contents are listed. If you are using anything that belongs to another person that is listed. Many people forget to list that DVR or cable modem that is rented or on loan.

If you live in California or any other community property state you must list your spouse if they are not filing with you.  If you have been divorced less than nine years, you must list the name of your former spouse.

If you have a business there are a number of questions that must be answered. The more complex the business the more questions that must be answered.

The SOFA is a lengthy and complicated series of questions that must be answered completely and correctly or your bankruptcy case could have problems. If the answers are not complete or don’t match with your tax returns and other materials that the trustee will review you will be challenged and may lose your discharge. Make use of a trusted and knowledgeable legal adviser to make certain that your case is well prepared.

Other S’s:

Image by Leo Reynolds.

I is for Income

What income do I need to disclose in my bankruptcy?

All of it gets listed one way or another. Your wages, commissions, bonuses, regular contributions to the household by a family member or housemate, retirement and pension income, workers compensation and unemployment. Loans don’t count and one-time contributions also don’t count.

Means Test Income

For purposes of the means test, the U.S. Bankruptcy Code defines current monthly income as including: “any amount paid by any entity other than the debtor (or in a joint case the debtor and the debtor’s spouse), on a regular basis for the household expenses of the debtor or the debtor’s dependents (and in a joint case the debtor’s spouse if not otherwise a dependent)…” Benefits received under the Social Security Act, payments to victims of war crimes or crimes against humanity on account of their status as victims of such crimes, and payments to victims of international terrorism or domestic terrorism on account of their status as victims of such terrorism are excluded from the means test.

The means test looks back at the past six months on income as defined above. If you file a bankruptcy in January, the past six-month (or look back) period is July through December. It is this six-month period that will determine what your average annual income is. You must compare your average annual income based on the past six-month period to the median average for your state to see if you qualify to file a Chapter 7 bankruptcy. If your income is too high to file a Chapter 7 you may still qualify to file a Chapter 13.

Income on Schedules and the Statement of Financial Affairs (SOFA)

There is a Schedule I for Income where you list your monthly income including Social Security payments and other income that might have been excluded form the means test look back income. This schedule will be compared with your expenses that are listed on another schedule. One of the bankruptcy complexities is that income and financial information is listed in more than one way within the same bankruptcy case.

There is also a question on the SOFA that asks for the past several years of income broken down by wages and other types of income. Your answers to these questions can come form your income tax returns.

For another slant see Jay Fleischman’s I is for Income. Also see Cathy Moran’s I is for IRS and Christopher McAvoy, I is for Income Tax Refunds.

More I’s:

Image credit: Leo Reynolds