CBS Post-Bankruptcy Recovery Planning 3 — Questions and Answers
Question 1: A Chapter 13 plan is completed and the debtor receives a discharge. What is the conventional mortgage waiting period from the discharge date under Fannie Mae guidelines?
- 1 year
- 2 years (Correct answer)
- 4 years
- 7 years
Correct answer: 2 years
Fannie Mae (FNMA) guidelines allow a conventional mortgage 2 years after Chapter 13 discharge if other underwriting criteria are met.
Question 2: Which emergency fund benchmark is most commonly recommended for post-bankruptcy clients as a first savings priority?
- 1 month of expenses
- 3–6 months of expenses (Correct answer)
- 12 months of expenses
- $10,000 flat regardless of income
Correct answer: 3–6 months of expenses
Standard financial planning guidance recommends 3–6 months of essential living expenses in a liquid emergency fund to prevent future debt spirals.
Question 3: A debtor's wages were garnished before bankruptcy. Post-discharge, their employer continues garnishing wages citing an administrative oversight. What is the debtor's most immediate legal remedy?
- File a new Chapter 7 petition
- Sue the employer in state court for negligence
- File a motion for contempt in the bankruptcy court (Correct answer)
- Dispute the garnishment with the state labor board
Correct answer: File a motion for contempt in the bankruptcy court
Continued wage garnishment after discharge violates the discharge injunction under 11 U.S.C. § 524, and a contempt motion in bankruptcy court is the proper remedy.
Question 4: Which type of income-based repayment plan for federal student loans can help a post-bankruptcy borrower manage non-dischargeable student loan debt?
- Standard 10-year repayment
- Extended fixed repayment
- SAVE (Saving on a Valuable Education) plan (Correct answer)
- Private refinancing plan
Correct answer: SAVE (Saving on a Valuable Education) plan
The SAVE plan caps monthly payments at a percentage of discretionary income, making post-bankruptcy student loan management more sustainable.
Question 5: A bankruptcy specialist advising a client on post-discharge tax planning should note that cancelled debt income (COD income) from discharged debts is generally treated how for federal tax purposes?
- Taxable as ordinary income in the discharge year
- Excluded from gross income under IRC § 108 for bankruptcy discharges (Correct answer)
- Reported as capital gains
- Deductible as a business loss
Correct answer: Excluded from gross income under IRC § 108 for bankruptcy discharges
Under IRC § 108(a)(1)(A), COD income resulting from a Title 11 bankruptcy case is excluded from the debtor's gross income.
Question 6: What is the primary purpose of a reaffirmation agreement in Chapter 7 from the perspective of post-bankruptcy credit rebuilding?
- To eliminate a lien on real property
- To keep the debt alive and continue building positive payment history (Correct answer)
- To reduce the principal owed on a secured debt
- To convert unsecured debt to secured debt
Correct answer: To keep the debt alive and continue building positive payment history
Reaffirming a debt allows the account to remain open and reported to credit bureaus, enabling on-time payments to rebuild credit after discharge.
Question 7: Which document should a post-bankruptcy debtor obtain and review annually to ensure discharged debts are correctly reported as discharged on their credit file?
- Proof of claim filed by creditors
- Annual credit report from AnnualCreditReport.com (Correct answer)
- Chapter 7 trustee's final report
- Bankruptcy court docket sheet
Correct answer: Annual credit report from AnnualCreditReport.com
Debtors are entitled to free annual credit reports from all three bureaus, which should be reviewed to confirm discharged debts are marked accurately.
CBS Post-Bankruptcy Recovery Planning 3
A Chapter 13 plan is completed and the debtor receives a discharge.
What is the conventional mortgage waiting period from the discharge date under Fannie Mae guidelines?