ExpertHard1 markMultiple Choice
CPA · Question 14 · Area II: Business Law
In a Chapter 7 bankruptcy liquidation, which of the following claims has the highest priority for distribution?
In a Chapter 7 bankruptcy liquidation, which of the following claims has the highest priority for distribution?
Answer options:
A.
Employee wages earned within 180 days of filing (up to statutory limit).
B.
Unpaid federal income taxes.
C.
Claims of general unsecured creditors.
D.
Domestic support obligations (alimony and child support).
How to approach this question
Mnemonic: 'SAG WEG CTI'. S=Support (Domestic Support) is #1.
Full Answer
D.Domestic support obligations (alimony and child support).✓ Correct
Under the Bankruptcy Code, Domestic Support Obligations (alimony, child support) have the first priority among unsecured claims, followed by Administrative expenses, Gap claims, Wages, Employee benefits, Grain farmers/Fishermen, Consumer deposits, Taxes, and Injury claims (DUI).
Common mistakes
Thinking Administrative expenses or Taxes are #1. They used to be higher, but Support is now #1.
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