Credit & Account Management Flashcards

Once a debtor files for bankruptcy, what is the immediate effect on collection activity?

Answer: An automatic stay halts most collection actions against the debtor

The automatic stay under 11 U.S.C. 362 takes effect at filing and bars most collection efforts.

How does a Chapter 13 bankruptcy differ from a Chapter 7 bankruptcy for individuals?

Answer: Chapter 13 involves a repayment plan typically lasting three to five years

Chapter 13 reorganizes debts through a court-approved repayment plan, while Chapter 7 liquidates non-exempt assets.

In a bankruptcy case, what is the purpose of a creditor filing a proof of claim?

Answer: To assert the amount owed so the creditor can share in distributions

A proof of claim documents the debt and lets the creditor participate in payments from the estate or plan.

Which statement about the statute of limitations on a debt is accurate?

Answer: It limits how long a creditor can sue and is separate from the credit reporting period

Statutes of limitations are set by state law and govern lawsuits, while FCRA separately governs reporting periods.

A customer's monthly debt payments equal 45% of gross monthly income. This debt-to-income ratio primarily measures which of the Five C's?

Answer: Capacity

Debt-to-income measures the borrower's ability to take on and repay additional obligations.

What is the primary goal of skip tracing in account management?

Answer: To locate a debtor who cannot be reached at known contact information

Skip tracing uses databases and other sources to find debtors who have moved or changed contact details.

Under the allowance method, how is a payment received on an account previously written off typically recorded?

Answer: By reinstating the receivable and crediting the allowance as a recovery

Recoveries reverse the write-off against the allowance and then record the cash collected.