Fully describe the Statement of Financial Affairs and the type of information that is captured on this form. Why is it crucial for the debtor to respond to the questions on the Statement of Financial Affairs thoroughly and truthfully? Identify the potential issues a paralegal must be able to spot while assisting the client with the petition, schedules, and, particularly, the Statement of

Question

Financial Affairs.

What will be an ideal response?

Answer 1

The Statement of Financial Affairs consists of a series of questions the debtor must answer thoroughly and truthfully about his or her recent financial affairs. The information the debtor must provide includes recent property transfers, payments to creditors, and gifts. Other financial affairs include a recent wage garnishment, closed bank accounts, repossessions, foreclosures, and lawsuits. A wage garnishment is the deduction from his or her wages of an amount the debtor owes, usually because of a court order. The debtor is also required to document losses from gambling and fire.

The debtor's accurate documentation of the previously mentioned financial information is crucial for the bankruptcy trustee to get a complete picture of the debtor's financial situation. In the consultation with the debtor, the bankruptcy attorney will caution the debtor about the importance of capturing this information honestly and completely. If not, the debtor could face the dismissal of the entire bankruptcy case and might endure the consequences of perjury.

The paralegal should remind the debtor of his or her duty to be honest in answering the questions. The paralegal is often the first person to see this completed form and should read it carefully and bring any suspicious financial transactions to the attention of the supervising attorney immediately. The attorney can determine whether any voidable transfers or preferences can be expected that would necessitate another meeting with the client. All debtors must answer questions 1-18 on the Statement of Financial Affairs, and questions 19-25 must be answered by commercial or business debtors.