ADRA ADRA Financial Analysis & Debt Assessment 1

Question 1

What is the debt-to-income (DTI) ratio threshold commonly used to identify a client as financially distressed and eligible for debt relief services?

Accepted Answer

Above 43%

Answer

A DTI ratio above 43% is the widely recognized threshold indicating a client may be in financial distress and benefit from debt relief assistance.

Question 2

Which financial statement is most useful when a debt relief agent needs to assess a client's ability to make ongoing monthly payments toward a settlement plan?

Accepted Answer

Monthly cash flow statement

Answer

A monthly cash flow statement reveals disposable income available each month, which directly determines what a client can contribute to a repayment or settlement plan.

Question 3

When calculating a client's total unsecured debt load, which of the following should be EXCLUDED?

Accepted Answer

Home mortgage balance

Answer

A home mortgage is secured debt (backed by collateral) and is excluded from unsecured debt calculations used in most debt relief programs.

Question 4

A client has $45,000 in unsecured debt and $1,800 in monthly disposable income. Approximately how many months would a full repayment plan take with no interest?

Accepted Answer

25 months

Answer

$45,000 ÷ $1,800 = 25 months, making Option A the mathematically correct estimate for a zero-interest scenario.

Question 5

Which metric best measures the proportion of a client's assets that could be liquidated to cover outstanding debts?

Accepted Answer

Liquidity ratio

Answer

The liquidity ratio measures how easily a client's assets can be converted to cash to meet debt obligations.

ADRA - Accredited Debt Relief Agent Practice Test

ADRA - Accredited Debt Relief Agent Practice Test

ADRA ADRA Financial Analysis & Debt Assessment 1