CRPA CRPA Collections & Debt Recovery 2 — Questions and Answers
Question 1: A payment arrangement plan is negotiated with a delinquent debtor. Which element is most critical to include in the written agreement?
- A list of all previous invoices regardless of status
- Specific payment amounts, due dates, and consequences of default (Correct answer)
- The debtor's full credit history
- Names of all individuals involved in the account
Correct answer: Specific payment amounts, due dates, and consequences of default
A valid payment arrangement agreement must clearly state the scheduled amounts, due dates, and what happens if the debtor defaults to be legally enforceable.
Question 2: What is the primary purpose of a dunning process in accounts receivable?
- To write off uncollectable accounts at year-end
- To systematically send escalating communications to delinquent customers (Correct answer)
- To calculate interest charges on overdue balances
- To assess customer creditworthiness before extending credit
Correct answer: To systematically send escalating communications to delinquent customers
Dunning is the structured process of sending progressively firm reminders and notices to customers with overdue balances to prompt payment.
Question 3: Under U.S. bankruptcy law, when a customer files Chapter 7 bankruptcy, what typically happens to unsecured trade receivables?
- They are paid in full from the bankruptcy estate first
- They are treated as priority claims above secured creditors
- They are discharged, and the creditor receives little or no recovery (Correct answer)
- They are automatically converted to equity in the debtor company
Correct answer: They are discharged, and the creditor receives little or no recovery
In Chapter 7 liquidation, unsecured trade creditors are low-priority and typically receive little or no recovery after secured creditors and administrative expenses are paid.
Question 4: A receivables manager wants to reduce the cost of collections while maintaining recovery rates. Which approach is most effective?
- Increasing headcount in the collections department
- Implementing automated early-stage outreach for low-risk, low-balance accounts (Correct answer)
- Outsourcing all collections to a third-party agency immediately
- Reducing credit terms to net 15 for all customers
Correct answer: Implementing automated early-stage outreach for low-risk, low-balance accounts
Automating low-risk, low-balance outreach frees skilled collectors to focus on high-value or complex accounts, reducing cost per dollar collected.
Question 5: What does the term 'right-party contact' mean in debt collection?
- Contacting a debtor through a licensed attorney only
- Verifying that the person being contacted is the actual account holder or authorized representative (Correct answer)
- Selecting the right collection agency for the account type
- Confirming the debt is within the statute of limitations
Correct answer: Verifying that the person being contacted is the actual account holder or authorized representative
Right-party contact ensures collectors are speaking with the actual debtor or an authorized party, not a third party, which is critical for FDCPA compliance.
Question 6: Which of the following best describes a 'charge-off' in receivables management?
- A discount offered to encourage early payment
- An accounting entry that removes an uncollectable receivable from active books (Correct answer)
- A legal judgment against a debtor
- A reversal of a previously posted payment
Correct answer: An accounting entry that removes an uncollectable receivable from active books
A charge-off is an accounting action where a receivable deemed uncollectable is removed from the active accounts receivable balance and recorded as a loss.
CRPA CRPA Collections & Debt Recovery 2
A payment arrangement plan is negotiated with a delinquent debtor.
Which element is most critical to include in the written agreement?