ExpertHard1 markMultiple Choice
CPA · Question 12 · Area II: Business Law
A debtor files for Chapter 7 bankruptcy. Which of the following debts is generally dischargeable?
A debtor files for Chapter 7 bankruptcy. Which of the following debts is generally dischargeable?
Answer options:
A.
Alimony and child support payments.
B.
Student loans (absent undue hardship).
C.
Income tax liability from a return filed 1 year ago.
D.
Claims arising from a breach of contract.
How to approach this question
Recall the list of non-dischargeable debts (FAT WED: Fraud, Alimony, Taxes (recent), Willful injury, Educational loans, Debts undisclosed). Contract breach is not on the list.
Full Answer
D.Claims arising from a breach of contract.✓ Correct
Claims for breach of contract are dischargeable in Chapter 7. Non-dischargeable debts include taxes (within 3 years), debts incurred by fraud, domestic support obligations (alimony/child support), and student loans.
Common mistakes
Thinking all taxes are non-dischargeable (older ones can be).
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