Completing the Statement of Financial Affairs in Bankruptcy

In the Statement of Financial Affairs (Form 7) you provide a summary of your financial history before you filed for bankruptcy.

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When you file for Chapter 7 or Chapter 13 bankruptcy, you must complete and file a number of forms, called the official bankruptcy forms. On one of those forms, the Statement of Financial Affairs (Official Form 7), you provide the court with a summary of your financial history before you filed for bankruptcy.

Here’s a rundown of the types of information you must provide on the Statement of Financial Affairs.

(To learn about the other forms you must file, see Completing the Bankruptcy Forms.)

How to Get the Statement of Financial Affairs

You can find the most recent version of the Statement of Financial Affairs on the U.S. Court’s website at www.uscourts.gov. To learn more about getting the official and other forms, see The Bankruptcy Forms: Getting Started.

The Purpose of the Statement of Financial Affairs

The Statement of Financial Affairs gives the bankruptcy trustee information about your recent financial transactions, such as payments to creditors, transfers of property, or gifts you made. In some circumstances, the trustee may be entitled to take back property that you transferred to others prior to filing for bankruptcy and sell it for the benefit of your unsecured creditors.

This arises more often in Chapter 7 cases, where you must give up nonexempt property. In Chapter 13 bankruptcy, this rarely happens, unless your plan proposes to pay your nonpriority, unsecured creditors only a small percentage of what you owe them.

(To learn more, see Pre-Bankruptcy Payments to Creditors: Can the Trustee Can the Money Back?

Information You Must Provide on the Statement of Financial Affairs

You must provide detailed information about financial transactions made within certain time periods prior to your bankruptcy filing. You’ll have to include information about things such as your employment and business income, payments to creditors, repossessions, foreclosures, lawsuits, wage attachments, garnishments, gifts, losses (for example from fire, theft, or gambling), property transfers, closed financial accounts, safe deposit boxes, and property you are holding for someone else.

One word of caution, when answering the questions on the Statement of Financial Affairs -- be honest and thorough. If the trustee or a creditor discovers that you intentionally left information off the form, the court may dismiss your case and you could even be prosecuted for perjury.

Definitions for Completing the Statement of Financial Affairs

The questions on the Statement of Financial Affairs are self-explanatory. However, a few items merit further discussion.

Payments to creditors (Question 3). When you list payments to creditors, you must distinguish between regular creditors and insiders. An insider is essentially a relative or close business associate. All other creditors, including close friends, are regular creditors. Payments to insiders get extra scrutiny.

  • You list payments to regular creditors on Part (a) of Question 3 – include all payments of more than $600 (to any one creditor) made within 90 days of your filing.
  • If your debts are primarily business debts, you’ll have to list all payments or other transfers made to a creditor within 90 days your bankruptcy filing if the payments involve property that is worth $6,225 or more.
  • You list payments to insiders (whether the debt is consumer or business) on Part (c) – you must list all such payments (regardless of the amount) made within the past year.

Losses (Question 8). If the loss was for an exempt item, most states also exempt the insurance proceeds, up to the exemption limit for the item. If the item was not exempt, the trustee is entitled to the insurance proceeds, if any. In either case, list any insurance proceeds you’ve received or expect to receive. If you experience a loss after you file, you should promptly amend your papers, as this question applies to losses both before you file and afterwards.

Payments related to debt counseling or bankruptcy (Question 9). If you paid an improperly high fee to an attorney, bankruptcy petition preparer, debt consultant, or debt consolidator, the trustee may try to get some of it back to distribute to your creditors.

Other transfers (Question 10). You must list all real and personal property that you’ve sold or given to someone else during the two years before you file for bankruptcy. Examples include selling or abandoning (junking) a car, pledging your house as security (collateral) for a loan, granting an easement on real estate, or trading property. This doesn’t include gifts or property you’ve parted with as a regular part of your business or financial affairs.

Transfers to irrevocable trusts (Question 10). You must list all transfers of your own property you have made in the previous ten years to an irrevocable trust that lists you as a beneficiary. These types of trusts—referred to as self-settled trusts—are commonly used by wealthy people to shield their assets from creditors and by disabled people to preserve their right to receive government benefits. In bankruptcy, however, assets placed in a self-settled trust will be considered nonexempt, which means you will have to pay your unsecured creditors at least the value of those assets. There is an exception that applies to assets placed in certain special needs trusts. (In re Schultz, 368 B.R 832 (D. Minn. 2007).)

Setoffs (Question 13). A setoff is when a creditor, often a bank, uses money in a customer’s account to pay a debt owed to the creditor by that customer. You must include any setoffs your creditors have made during the last 90 days.

Questions for Businesses or Former Business Owners

If you have been in business within six years prior to your bankruptcy filing, you must complete Questions 19 through 25.  If you haven’t been in business during this time period, you skip these questions.

What it means to be “in business” is defined on the first page of the Statement of Financial Affairs. It includes, corporations, partnerships, and sole proprietorships.

Signing the Statement of Financial Affairs

As with the other bankruptcy forms, you must sign the Statement of Affairs under penalty of perjury, stating that all the information you have provided is true and correct. The form reminds you that the penalty for making a false statement is a fine of up to $500,000, imprisonment for up to five years, or both.

This article provides general information only. There are many legal issues involved and important decisions to be made when filing for bankruptcy. You must understand the entire This article provides general information only. There are many legal issues involved and important decisions to be made when filing for bankruptcy. You must understand the entire bankruptcy process, learn about the applicable federal and state laws, and determine how those laws will affect your particular situation before you complete the bankruptcy forms. If you want to file bankruptcy without a lawyer, use a good do-it-yourself book like Nolo's How to File for Chapter 7 Bankruptcy to ensure you make well informed decisions about your bankruptcy case.

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