Business law
The Bankruptcy Rules
Sort the chapter, test each debt for discharge, and pay claims in the fixed section 507 order after clawing back preferences.
How the exam words it
- -The stem asks which chapter fits, or whether an involuntary petition is valid.
- -A specific debt (taxes, student loans, domestic support, a fraud judgment) is at issue and it asks whether it is dischargeable.
- -A payment to a creditor before filing raises a voidable preference.
- -Assets are distributed and it asks which claims are paid first.
The playbook
- 1Match the chapter: 7 liquidation, 11 reorganization, 13 individual wage-earner plan; an involuntary petition needs 3 creditors owed $18,600 or more together (or 1 creditor if there are fewer than 12).
- 2Screen the debt: most debts discharge, but taxes, student loans, domestic support, and debts from fraud or willful injury do not.
- 3Void a preference: a transfer to a creditor for an antecedent debt within 90 days (1 year for an insider) while insolvent that lets the creditor receive more than in a Chapter 7.
- 4Pay in section 507 order: secured claims against their collateral first, then priority unsecured (domestic support, administrative expenses, then certain wages and taxes), then general unsecured.
The trap
Assuming bankruptcy wipes out every debt. Taxes, student loans, and domestic support obligations generally survive the discharge.
How the exam varies it
The same pattern, re-skinned along these axes:
Which chapter, and voluntary versus involuntaryDischargeability of a specific debtPreference recovery versus the section 507 distribution order
Drill this pattern
8 questions of The Bankruptcy Rules from across the AUD topics. Clear it by getting 5 right with a streak of 3.