ExpertHard1 markMultiple Choice
CPA · Question 10 · Area II: Business Law
Debtor D has filed for Chapter 7 bankruptcy. Which of the following debts is most likely to be discharged?
Debtor D has filed for Chapter 7 bankruptcy. Which of the following debts is most likely to be discharged?
Answer options:
A.
A student loan that has been due for 3 years.
B.
Alimony payments owed to a former spouse.
C.
A claim arising from a breach of contract judgment.
D.
Income tax liability from a return due 1 year ago.
How to approach this question
Recall the list of non-dischargeable debts (WAFTED: Willful injury, Alimony, Fraud, Taxes (recent), Educational loans, Debts unlisted).
Full Answer
C.A claim arising from a breach of contract judgment.✓ Correct
Under the Bankruptcy Code, certain debts are non-dischargeable, including student loans (generally), domestic support obligations (alimony/child support), and recent taxes (due within 3 years). A judgment for breach of contract (or ordinary negligence) is a general unsecured debt that is dischargeable in Chapter 7.
Common mistakes
Thinking all court judgments are non-dischargeable (only fraud/willful injury judgments are non-dischargeable).
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