Financial Counseling Certification Program (FiCEP) Practice Exam

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What should members avoid if they wish to re-establish debt after bankruptcy?

Relying on cash for all purchases
Consulting a financial advisor
Taking on no new debt in the future
Learning about responsible borrowing

The correct answer is: Taking on no new debt in the future

Re-establishing debt after a bankruptcy is a nuanced process that requires a strategic approach. Taking on no new debt in the future is a method that might seem prudent at first, but in reality, it can be counterproductive if the goal is to rebuild a positive credit history. After bankruptcy, individuals often need to engage with credit responsibly to demonstrate their ability to manage debt. By not taking on any new debt, members miss out on opportunities to build their credit score, as one of the factors affecting credit scores is the individual's credit utilization and payment history. Responsible borrowing, which may include using secured credit cards or small loans, can help in rebuilding a credit profile. Therefore, avoiding future debt entirely contradicts the objective of re-establishing creditworthiness. The other options, such as relying solely on cash for all purchases or avoiding consultations with advisors, don't align with the idea of rebuilding and learning about financial responsibility that is crucial after bankruptcy. Understanding and managing credit allows individuals to regain financial stability and independence over time.