FiCEP Handling Financial Difficulties 4

Question 1

A client is 90 days past due on their mortgage and has received a Notice of Default. Which loss mitigation option allows the client to sell the home for less than the outstanding mortgage balance with lender approval?

Accepted Answer

Short sale

Answer

A short sale allows the homeowner to sell the property for less than the mortgage balance with the lender's approval, avoiding foreclosure.

Question 2

Under the Fair Debt Collection Practices Act (FDCPA), within how many days must a debt collector send a written validation notice after initially contacting a consumer?

Accepted Answer

5 days

Answer

The FDCPA requires debt collectors to send a written validation notice within 5 days of the initial communication with the consumer.

Question 3

A client with $40,000 in unsecured debt and a stable income wants to repay creditors in full over time while stopping collection calls. Which option is MOST appropriate?

Accepted Answer

Debt management plan (DMP)

Answer

A Debt Management Plan (DMP) through a nonprofit credit counseling agency allows clients to repay unsecured debt in full over 3–5 years while stopping collection calls.

Question 4

Which type of bankruptcy exemption system allows a debtor to choose between federal exemptions and their state's exemptions, whichever is more favorable?

Accepted Answer

Opt-in system

Answer

In opt-in states, debtors may elect to use federal bankruptcy exemptions if they are more favorable than state exemptions.

Question 5

A client receives a 1099-C form from a creditor after a debt settlement. What does this form represent?

Accepted Answer

Cancellation of debt income that may be taxable

Answer

A 1099-C reports cancelled debt as income to the IRS, meaning the forgiven amount may be taxable unless an exclusion (such as insolvency) applies.

FiCEP - Financial Counseling Certification Program Practice Test

FiCEP - Financial Counseling Certification Program Practice Test

FiCEP Handling Financial Difficulties 4