Financial Counseling Certification Program (FiCEP) Practice Exam

When assisting a member in severe financial distress, what is the first step to take?

1. Encourage them to take on more debt

2. Determine if the member is judgment proof

3. Suggest filing for bankruptcy immediately

4. Ignore their financial history

The correct answer is: Determine if the member is judgment proof

When assisting a member in severe financial distress, determining if the member is judgment proof is a crucial first step. Being judgment proof means that a person has no assets or income that can be legally collected upon in the event of a court judgment. This knowledge can significantly shape the approach to help the individual. Understanding their judgment-proof status allows the financial counselor to tailor advice effectively and realistically, creating a foundation for further financial planning. If the member is indeed judgment proof, pressing them to pursue debt repayment or consider bankruptcy may not be necessary, allowing for more productive conversations around potential financial recovery strategies or budgeting techniques that align with their current situation. The other options do not effectively address the member's immediate needs. Encouraging further debt accumulation could worsen their financial challenges, suggesting bankruptcy without a thorough analysis may lead to unnecessary stress and complications, and ignoring their financial history would be careless and unhelpful in understanding their current predicament. Thus, assessing their judicial standing provides critical insight that informs all subsequent actions and recommendations.