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, _____.

Question

Quizplus · Accepted Answer

Certain debts are not affected by the discharge of a bankrupt debtor. The Bankruptcy Code provides that a discharge in bankruptcy releases a debtor from all provable debts except for those that are due as a tax or fine to the United States or any state or local unit of government. In this scenario, the $500 debt that Bill owes the IRS is a nondischargeable debt.

Bill Filed a Petition for Bankruptcy Under Chapter 7 of the Bankruptcy