ADRA ADRA Financial Analysis & Debt Assessment 2

Question 1

What does the term 'insolvency' mean in the context of debt relief assessment?

Accepted Answer

A client's total liabilities exceed total assets

Answer

Insolvency means a client's total liabilities exceed total assets, which is a key qualification criterion for certain debt relief programs.

Question 2

Which document should an ADRA agent request to verify a client's reported income during the financial analysis phase?

Accepted Answer

Recent pay stubs and last two years of tax returns

Answer

Pay stubs and tax returns provide verified, documented evidence of income that cannot be easily falsified, ensuring accurate financial analysis.

Question 3

A client's credit card carries a 24.99% APR on a $10,000 balance with a minimum payment of $250/month. Approximately how many years will it take to pay off if only minimum payments are made?

Accepted Answer

Over 10 years

Answer

At high APRs with minimum payments, the majority of each payment covers interest, extending payoff to well over a decade.

Question 4

What is 'charge-off' status on a debt account, and how does it affect a client's debt relief options?

Accepted Answer

The creditor has written off the debt as a loss but the debt still legally exists and can still be collected

Answer

A charge-off means the original creditor has written the debt off their books as a loss, but the debt remains legally valid and collectable, often sold to a collection agency.

Question 5

Which credit bureau score model is most commonly used by creditors in the United States when evaluating a client's creditworthiness?

Accepted Answer

FICO Score

Answer

The FICO Score is the most widely used credit scoring model in the U.S., used by approximately 90% of lenders to assess credit risk.

ADRA - Accredited Debt Relief Agent Practice Test

ADRA - Accredited Debt Relief Agent Practice Test

ADRA ADRA Financial Analysis & Debt Assessment 2