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 best describes 'subrogation' in the context of credit insurance and collections?
Answer: The insurer's right to pursue the debtor after paying the creditor's claim
Subrogation allows the credit insurer, after compensating the creditor, to step into the creditor's shoes and pursue recovery from the debtor.
A commercial debtor proposes a composition agreement. This means:
Answer: Creditors agree to accept a pro-rata percentage of their claims as full settlement outside of formal bankruptcy
A composition agreement is an out-of-court arrangement where creditors collectively accept a reduced percentage of what they are owed in full satisfaction of the debt.
A 'mechanic's lien' is a collection tool most commonly used by:
Answer: Contractors, suppliers, and laborers who have improved real property
Mechanic's liens are statutory liens available to those who furnish labor or materials to improve real property, providing security against the property itself.
In a Chapter 11 reorganization, a creditor's committee primarily represents:
Answer: Unsecured creditors' interests in negotiating and reviewing the reorganization plan
The unsecured creditors' committee is appointed to represent the collective interests of general unsecured creditors and participates in negotiating the plan of reorganization.
What does 'best efforts' mean in the context of a commercial collection agency agreement?
Answer: The agency must use reasonable, legally compliant methods to collect but does not guarantee a specific recovery amount
A 'best efforts' standard requires the agency to employ diligent and lawful collection techniques but does not create a guarantee of any particular outcome.
A creditor considers using a pre-judgment attachment to secure a claim. This remedy is appropriate when:
Answer: There is credible evidence the debtor may dissipate or transfer assets before judgment can be obtained
Pre-judgment attachment is an extraordinary remedy used when there is a real risk the debtor will move or hide assets before a judgment can be enforced.
The 'net recovery rate' on a charged-off receivable portfolio is calculated as:
Answer: Gross collections minus collection costs, divided by the face value of the portfolio
Net recovery rate accounts for the cost of collection, giving the true economic return on charged-off receivables relative to their face value.