Page 40 - Bankruptcy Volume 1

Statement of Financial Affairs (SOFA)

The SOFA is a series of detailed questions concerning certain of the debtor’s property and prepetition
conduct. The purpose of the statement is to provide the court, shareholders, creditors, and others with an
interest in the bankruptcy proceeding with some background on the company, the status of certain legal
proceedings to which it is a party, and certain of its historical transactions.

SOFA Question 1 — Gross Revenue from Business

The business is asked to provide the gross revenues from business for the year of filing, as well as the
two preceding years. If net income is the number most commonly reported publicly and is the number
most readily available to the debtor, it is not unusual to see the net income — rather than gross income
— reported in response to question 1, with a note explaining the net listing to the reader.

SOFA Question 2 — Nonbusiness Revenue

List all items other than the operation of the core business for corporations and partnerships. Common
listings include the sale of real or personal property, sale of the entire business, interest, dividends, roy-
alties, and so on.

SOFA Questions 3 Through 6 — Certain Payments and Transfers to Creditors and Others

Questions 3 through 6 require the listing of payments and transfers of property of the debtor to creditors,
creditors deemed insiders, repossessions, foreclosures, returns and setoffs. Each question covers various
relevant time periods preceding the petition for relief.

The payment information collected for these questions allows creditors to identify payments that the
debtor has made during the relevant 90-day or 1-year period and often provides the basis for preference
actions by the debtor. In addition to being generally informative, the debtor’s responses to these ques-
tions can help a professional identify whether the creditor may be the subject of a later avoidance action
or, if the professional continues to provide service to the debtor, whether this may create the appearance
of a conflict, whether actual or not. (See chapter 8, “Avoidance Powers,” of this practice aid on prefer-
ences).

SOFA Questions 7 — Litigation

List all open litigation and closed cases, investigations, arbitrations, mediations, and audits within one
year of the petition date.

SOFA Question 8 — Assignments and Receiverships

List all property that has been assigned for the benefit of creditors (ABC) under the applicable state law
governing ABCs for the state where the property is located, or property that has been held by a court-
appointed receiver, custodian, or other court-appointed officer.

SOFA Question 9 — Gifts or Charitable Contributions Made Within One Year

List all charitable contributions during the relevant one-year period. Gifts listed should be reconciled to
those reported for tax purposes. Note the exclusions for de minimis gifts.

SOFA Question 10 — Losses

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