Question

Bill filed a petition for bankruptcy under Chapter 7 of the Bankruptcy Act. Bill listed, among others, the following debts: a debt to the National Bank for $10,000 secured by his 1980 truck, which is valued at $3,500; an unsecured debt to his friend, Francis; a $500 debt to the IRS for 1989 federal income taxes; and a $500 student loan to the university which was due one year ago. In this scenario, _____.

a. the $500 debt to the IRS is a nondischargeable debt
b. Francis can claim the debt without filing a proof of claim
c. the $500 student loan to the university is a dischargeable debt
d. the bank can receive preferential payment because the debt owed to it is the highest

Answer 1

a. the $500 debt to the IRS is a nondischargeable debt

Step-by-step explanation:

The $500 debt to the IRS is a nondischargeable debt .

Certain debts are not affected by the discharge of a bankrupt debtor and the bankruptcy code provides the discharge as well.