ADRA Debt Relief Programs & Consumer Options 2

Question 1

What is 'debt validation' in the context of consumer debt relief?

Accepted Answer

A consumer's right under the FDCPA to request written proof that a debt is owed and that the collector has authority to collect it

Answer

A process where a creditor confirms a client's debt is legally enforceable in court

Answer

A credit bureau process to verify all reported balances

Answer

A court order confirming the amount owed before a judgment is entered

Question 2

Which federal law governs how much of a debtor's wages can be garnished by creditors?

Accepted Answer

Title III of the Consumer Credit Protection Act (CCPA)

Answer

The Fair Credit Reporting Act (FCRA)

Answer

The Consumer Financial Protection Act (CFPA)

Answer

The Dodd-Frank Wall Street Reform Act

Question 3

A client has $30,000 in credit card debt and enrolls in a debt settlement program. The settlement company negotiates the debt down to $15,000. What is the tax implication of the forgiven $15,000?

Accepted Answer

The forgiven $15,000 is generally considered taxable income and the creditor may issue a 1099-C

Answer

There is no tax consequence because the debt was personal, not business-related

Answer

The $15,000 is deductible as a loss on the client's tax return

Answer

The client pays a flat 10% penalty tax on the forgiven amount

Question 4

The 'insolvency exclusion' for cancelled debt income means:

Accepted Answer

A debtor can exclude cancelled debt from income to the extent they were insolvent immediately before the cancellation

Answer

A debtor in bankruptcy is automatically exempt from all taxes

Answer

Only secured debt cancellations are excluded from taxable income

Answer

Cancelled credit card debt is never taxable if the debtor has no assets

Question 5

Which debt relief option is MOST appropriate for a client whose primary goal is to stop a home foreclosure and catch up on missed mortgage payments over time?

Accepted Answer

Chapter 13 bankruptcy

Answer

Chapter 7 bankruptcy

Answer

Debt settlement program

Answer

Balance transfer to a new credit card

Question 6

When advising a client about debt relief options, an ADRA agent should FIRST:

Accepted Answer

Conduct a full financial assessment of income, expenses, assets, and liabilities

Answer

Enroll the client in the program with the highest fee

Answer

Recommend debt settlement for all clients with unsecured debt

Answer

Advise the client to stop paying all creditors immediately

Question 7

Which of the following debts CANNOT be discharged in a standard Chapter 7 bankruptcy?

Accepted Answer

Federal student loans (in most cases)

Answer

Medical bills

Answer

Credit card debt

Answer

Personal loans from a bank