ADRA Debt Relief Programs & Consumer Options

Question 1

Which type of bankruptcy allows an individual to keep certain exempt assets while having most unsecured debts discharged?

Accepted Answer

Chapter 7

Answer

Chapter 7 bankruptcy is a liquidation process that discharges most unsecured debts while allowing debtors to keep exempt assets such as a primary home (up to a limit), vehicle, and basic household items.

Question 2

A Debt Management Plan (DMP) is typically administered by which type of organization?

Accepted Answer

A nonprofit credit counseling agency

Answer

DMPs are structured repayment plans administered by nonprofit credit counseling agencies, which negotiate reduced interest rates with creditors on the debtor's behalf.

Question 3

What is the typical timeframe for completing a Chapter 13 bankruptcy repayment plan?

Accepted Answer

3 to 5 years

Answer

Chapter 13 repayment plans must be completed within 3 to 5 years, with the length depending on the debtor's income relative to their state's median income.

Question 4

Debt consolidation loans are BEST suited for clients who:

Accepted Answer

Have stable income and credit scores that qualify for a lower interest rate than existing debts

Answer

Debt consolidation loans benefit clients with sufficient creditworthiness to secure a lower interest rate, allowing them to combine multiple debts into one manageable payment at reduced cost.

Question 5

Which debt relief option typically has the MOST negative short-term impact on a client's credit score?

Accepted Answer

Debt settlement / negotiating a lump-sum payoff for less than owed

Answer

Debt settlement requires accounts to fall severely delinquent before creditors will negotiate, causing major derogatory marks on the credit report and significantly lowering the credit score.

ADRA - Accredited Debt Relief Agent Practice Test

ADRA - Accredited Debt Relief Agent Practice Test

ADRA Debt Relief Programs & Consumer Options