This is part five in the six part series on “How to Prepare a Consumer Chapter 7 Bankruptcy without a Nebraska Bankruptcy Attorney”.
We discussed the importance of properly completing the Bankruptcy Means Test in the first article in the series.
In subsequent articles we discussed filling out the creditor, property, and income and expense schedules.
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This article will provide information on completing the Statement of Financial Affairs, often abbreviated SOFA.
Before moving to that, I will again state that it is not advisable to even attempt to prepare a bankruptcy petition and schedules without the assistance and advice of a Nebraska Bankruptcy Attorney. The information provided and discussed in this article is for general informational purposes only and does not take into account someone’s unique circumstances.
Statement of Financial Affairs (SOFA)
The Statement of Financial Affairs gets the acronym SOFA because it is the largest portion of the Chapter 7 bankruptcy petition. Despite its length, many portions of the SOFA do not pertain to most ordinary debtors. Even so, it is important to read through each question and instruction to make sure it is being filled out correctly and honestly.
The article will reference each line of the SOFA and what specifically it is asking the debtor to do.
Line 1-Income from Employment or Operation of business
This line is requesting the debtor to list the gross income the debtor has earned for the previous two years as well as the year to date amount for each form of employment or business income. If you are married, both spouses’ information needs to be included.
Line 2-Income from other than employment or Operation of business
This line requests including all income, other than wages and business income, received from the previous two years as well as the year to date amount. Examples include retirement distributions, social security, disability, worker’s compensation, unemployment compensation, pension, etc.
Line 3-Payments to Creditors
Subsection (a) asks the debtor to list all payments made to creditors over $600 in the previous 90 day period.
Subsection (b) doesn’t apply for the purposes of our discussion. If you believe your debts are not primarily consumer debts, you should seek the counsel of a Nebraska Bankruptcy Attorney.
Subsection (c) asks the debtor to list all payments made to creditors who are insiders within the past year. Insiders are generally family members or business partners.
Check out my article on preference payments and the importance of listing all payments made to creditors.
Line 4-Lawsuits, garnishments, executions, etc.
In subsection (a), you need to list all lawsuits or administrative proceedings where the debtor was a party within the year. This doesn’t mean just lawsuits where the debtor was sued, but also lawsuits where the debtor sued someone else.
Subsection (b) deals with listing property that was attached, garnished, or seized within the past year. This includes repossession of property that has not yet been sold, garnishment of wages or bank accounts, or attachment and execution of personal property.
Line 5-Repossessions, foreclosures and returns
This is similar to what was listed in Line 4, subsection (b), but also includes foreclosed property.
Line 6-Assignments and Receiverships
Assignments and Receiverships are different types of systems to allow the sale of property belonging to the debtor for the benefit of creditors. Ordinarily, these deal with business debtors, but in some cases an individual may be involved. If your case deals with assignments or receiverships, you should contact a Nebraska Bankruptcy Attorney.
Line 7-Gifts
For this line, a debtor needs to include all charitable contributions or gifts made within the year. You do not have to include ordinary and usual gifts to family members if they total less than $200 per family member. Examples of ordinary and usual gifts may be things like birthday presents, Christmas gifts, and wedding or graduation gifts. Additionally, you do not need to list charitable contributions if they totaled less than $100 per organization.
Line 8-Losses
This line requires a debtor to list all losses from fire, theft, other casualty or gambling within the past year or since the case was filed. Yes, the Bankruptcy Code requires a debtor to keep the Bankruptcy Court and Bankruptcy Trustee notified of losses during the case.
Line 9-Payments related to debt counseling or bankruptcy
If you, or anyone on your behalf, paid anyone, or transferred property to anyone, for services related to debt counseling or bankruptcy; you need to list them.
Line 10-Other Transfers
On this line you will include any other property that was transferred within 2 years before the bankruptcy filing.
Line 11-Closed Financial Accounts
This line requires you to list any accounts the debtor had an interest in whatsoever that was closed, sold or transferred within 1 year of the bankruptcy filing. If a bank closed your account due to an overdraft, you need to list it. If you had U.S. Savings Bonds that finally matured and you cashed them within the year, you must list it.
Line 12-Safe Deposit Boxes
Have a safe deposit box or had one within the year previous to the bankruptcy filing? Yep, you list it and the contents.
Line 13-Setoffs
Setoffs are somewhat complicated and I have written about them before. Essentially, if you owe a bank money and you have an account at that bank; the bank can take the money in the account to “setoff” what is owed to the bank. That is why I always advise my clients to stop banking at a bank they owe money to. If a bank did a setoff within 90 days of the bankruptcy petition, you need to list it.
Line 14-Property Held For Another Person
Do you drive a friend’s vehicle and have it stored on your property? Have a storage unit that your brother put some of his stuff in? Borrow your neighbors chainsaw and haven’t returned it yet? List anything owned by someone else in your possession.
Line 15-Prior Address of Debtor
Pretty self explanatory. Where have you lived in the past 3 years? List them.
Line 16-Spouses and Former Spouses
Nebraska is not a community property state for marriage purposes. I’m not going to get into what community property means, but if you were married and have lived in a community property state within 8 years of the bankruptcy petition filing, you need to list your spouse or former spouse. Those states are listed in the form instructions.
Line 17-Environmental Information
If the government says you are liable or potentially liable for the environmental issues on your property, you need to list it.
Line 18-25: Business Stuff
This guide does not include legal information about business ownership and bankruptcy. These lines require listing business information of the debtor. If these apply to you, you should definitely seek the help of a Nebraska Bankruptcy Lawyer. Filing without understanding the impact on a current business could result in that business being shut down, sold, liquidated, or a whole host of other things.
Conclusion
Tired yet? SOFA is long and tedious, but we’re almost to the point of finishing the bankruptcy petition and declare bankruptcy in Nebraska.
The last article will focus on the miscellaneous forms and schedules you need to complete in order to fully prepare your Nebraska Chapter 7 Bankruptcy Petition.
If you have come to the realization that filing a bankruptcy is not a simple task and you want some good legal advice and analysis about your unique situation, and you live in Nebraska, contact me to schedule an appointment, or you can receive a free Nebraska bankruptcy analysis to see where you stand.