ExpertMedium1 markMultiple Choice
CPA · Question 20 · Area 2: Business Law
Which of the following debts is generally dischargeable in a Chapter 7 bankruptcy?
Which of the following debts is generally dischargeable in a Chapter 7 bankruptcy?
Answer options:
A.
Alimony and child support payments.
B.
Student loans (absent undue hardship).
C.
Credit card debt incurred 2 years ago for luxury goods.
D.
Debts incurred through fraud or embezzlement.
How to approach this question
Memorize FAT WED (Fraud, Alimony, Taxes, Willful injury, Educational loans, Debts undisclosed). Credit cards are dischargeable unless incurred fraudulently or very recently for luxuries.
Full Answer
C.Credit card debt incurred 2 years ago for luxury goods.✓ Correct
Credit card debt is general unsecured debt and is dischargeable unless it falls under the specific exception for luxury goods purchased shortly before filing (presumption of fraud). 2 years ago is well outside that window.
Common mistakes
Assuming 'luxury goods' makes it automatically non-dischargeable regardless of timing.
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