A debtor files for Chapter 7 bankruptcy. Which of the following debts is generally dischargeable?

Answer options:

Alimony and child support payments.

Student loans (absent undue hardship).

Income tax liability from a return filed 1 year ago.

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).

Question 11 All questions Question 13

Practice the full CPA REG Practice Exam 4

72 questions · hints · full answers · grading

More questions from this exam

Q01A CPA is representing a client in an IRS examination. The client has requested that the CPA not p...Hard Q02A tax return preparer is engaged to prepare a tax return for a client who has a significant deduc...Hard Q03Regarding the burden of proof in a civil tax proceeding, which of the following statements is cor...Hard Q04A taxpayer filed their Year 1 individual income tax return on April 1, Year 2. The return reporte...Hard Q05Under the Ultramares doctrine regarding a CPA's liability for negligence to third parties, which ...Hard

View all 72 questions →