Collections & Recovery Flashcards
7 cards from real CCM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Collections & Recovery flashcards as text
Which of the following is a primary objective when negotiating a payment plan with a delinquent commercial debtor?
Answer: Maximize recovery while preserving the business relationship where viable
Effective commercial collections balance recovery goals with relationship preservation, especially if the debtor is a valuable long-term customer.
A judgment lien gives a creditor what type of security interest?
Answer: An interest in the debtor's non-exempt real and personal property
A recorded judgment lien attaches to the debtor's non-exempt real and personal property in the jurisdiction where it is filed.
A creditor extends a payment plan to a debtor who later defaults again. Which document best protects the creditor's legal position?
Answer: A signed forbearance agreement or promissory note acknowledging the debt and new terms
A signed forbearance agreement or promissory note creates a clear legal record of the debt balance and the agreed repayment terms.
The 'statute of limitations' in collections refers to:
Answer: The period within which a creditor must file suit to collect a debt
The statute of limitations sets the maximum time after a default during which a creditor can bring a legal action to collect the debt.
Which ratio is most useful for assessing a debtor company's short-term ability to repay outstanding invoices?
Answer: Current ratio (current assets ÷ current liabilities)
The current ratio measures whether a company has enough short-term assets to cover its short-term obligations, indicating liquidity for near-term payables.
Under UCC Article 9, a 'perfected' security interest provides a creditor with:
Answer: Priority over subsequent lien creditors and a trustee in bankruptcy
Perfection of a security interest (typically by filing a UCC-1 financing statement) establishes the creditor's priority claim over later creditors and the bankruptcy trustee.
When a commercial account is placed with an outside collection agency, the creditor typically pays the agency through:
Answer: A contingency fee based on a percentage of amounts actually recovered
Most third-party commercial collection agencies work on contingency, earning a percentage of what they successfully collect on the creditor's behalf.