Debt Management and Consumer Advice Quiz

What is the first step in creating a budget to manage debt?

• Hire a financial advisor

• Invest in stocks

• Gather bills and pay stubs

• Apply for a loan

Answer explanation

The first step in creating a budget to manage debt is to gather bills and pay stubs. This helps you understand your current financial situation and obligations, which is essential for effective budgeting.

What should you do if your debt has already gone to a debt collector?

• File for bankruptcy

• Talk to the collector at least once

• Pay the debt immediately

• Ignore the collector

Answer explanation

Talking to the collector at least once is crucial. It allows you to understand your options, negotiate terms, and potentially avoid further legal action. Ignoring them can lead to more problems.

What is a sign of a legitimate credit counseling organization?

• Guarantees debt settlement

• Offers free educational materials

• Promises to fix all your problems

• Charges high upfront fees

Answer explanation

A legitimate credit counseling organization offers free educational materials to help clients understand their financial situation. In contrast, guarantees of debt settlement or promises to fix all problems are red flags.

What is a debt management plan?

• A strategy to invest in real estate

• A payment schedule to repay unsecured debts

• A plan to increase your credit limit

• A method to avoid paying taxes

Answer explanation

A debt management plan is specifically designed as a payment schedule to help individuals repay their unsecured debts, making it the correct choice among the options provided.

What should you do if you’re having trouble paying your mortgage?

• Ignore the lender

• Sell your house immediately

• Apply for a new mortgage

• Contact a non-profit housing counseling organization

Answer explanation

If you're having trouble paying your mortgage, the best step is to contact a non-profit housing counseling organization. They can provide guidance and resources to help you manage your situation effectively.

What is the statute of limitations in debt collection?

• The time period a collector can sue you for a debt

• The maximum interest rate on a loan

• The minimum payment required on a credit card

• The duration of a mortgage loan

Answer explanation

The statute of limitations in debt collection refers to the time period a collector can sue you for a debt. This means after a certain time, they can no longer legally pursue the debt in court.

What is a potential consequence of filing for personal bankruptcy?

• Discharge of all types of debt

• Automatic approval for new loans

• Immediate increase in credit score

• Long-term negative impact on credit

Answer explanation

Filing for personal bankruptcy can lead to a long-term negative impact on credit, as it remains on your credit report for up to 10 years, making it harder to obtain new credit or loans in the future.

What is a debt consolidation loan?

• A loan to combine multiple debts into one

• A loan to buy a new car

• A loan to pay for education

• A loan to start a business

Answer explanation

A debt consolidation loan is specifically designed to combine multiple debts into one single loan, making it easier to manage payments. This distinguishes it from loans for cars, education, or starting a business.

What is the difference between Chapter 13 and Chapter 7 bankruptcy?

• Chapter 7 allows keeping property with a repayment plan

• Chapter 7 involves a repayment plan

• Chapter 13 involves liquidating assets

• Chapter 13 is known as straight bankruptcy

Answer explanation

Chapter 7 bankruptcy allows individuals to keep certain property while discharging debts, but it does not involve a repayment plan. In contrast, Chapter 13 involves a repayment plan to pay back debts over time.

What should you do if you paid a scammer?

• Contact a debt settlement company

• Report it to the FTC

• Ignore the situation

• Pay more money to the scammer

Answer explanation

If you paid a scammer, the best course of action is to report it to the FTC. This helps protect others from similar scams and may assist in recovering your funds.