“Financial Affairs” is a kind of catch-all for the part of the bankruptcy filing I call the “movie.” It is for things that have happened over time.
Contrast this with the bankruptcy schedules A-J. They are like a still photograph of what is true for you as of the date of filing the case. Since there has to be a bright line between your old financial life and the new one after bankruptcy, the petition date is that bright line on the calendar. That is what is true as to your property, liabilities, and budget as of the petition filing date.
The Statement of Financial Affairs is a ten-page form that captures what happened before you filed bankruptcy, even many years before. It brings in and quantifies your income for the two prior years and year to date from whatever source. All the events of significance in the last year or two are drawn out in a net of multiple questions that give the reader of the completed form a pretty good idea, especially when read in conjunction with the schedules, exactly what the story is with this particular case of insolvency.
This is something only an attorney should go over with you. I believe this not only because is it my experience that debtors left to their own devices or with only the assistance of a paralegal rarely fill it out well. I know from having done hundreds and hundreds of them that unless the right questions are asked, which are not on the form necessarily, information will be left out. Long before you and I would sit down with the Statement of Financial Affairs actually in hand, I’m categorizing things you’ve told me in other contexts while we’re discussing your case generally into matters I have to disclose about financial affairs. So I’m comparing that to what you’re telling during the financial affairs interview. That leads me to ask you the right questions. An attorney needs to know his case inside and out.
For instance, if you’ve transferred any property in the last two years. Property is a pretty broad term. Without inquiries into specifics some transactions will be omitted. Omissions on the Statement of Financial Affairs is a leading reason why discharges are denied, especially on a question like transfers.
What Not to Do
On average, every fifth consultation or so, someone will ask me whether we shouldn’t just transfer some asset out of the estate. “Can’t I just deed my house over to my children?” is a typical questions. It is the Statement of Financial Affairs that would pick that up, and it is definitely a no-no. There are many ways to protect your assets, and your lawyer can do it legally and prevent any problems in your bankruptcy case.