Creating Payment Arrangements

When you create a payment arrangement, you are actually creating a contract. This contract is just like other contracts in that:

It holds debt.
It is periodically billed.
When a payment is received, the contract's debt is reduced.
If the contract becomes delinquent, a collection process is initiated to collect the overdue debt.

Debt is transferred to a payment arrangement contract (PA contract) from the customer's delinquent contracts at the inception of the payment arrangement.

When you transfer delinquent debt from the delinquent contracts to the PA contract, the debt is removed from the delinquent contracts. If you transfer all debt from the delinquent contracts, the customer will no longer be in arrears in a given debt class (and if the customer is no longer in arrears, active collection process will be cancelled).

Note: Use the Payment Arrangement Transaction. You could do the above functions by adding a new contract and creating transfer adjustments. However, this is tedious. Rather, use the Payment Arrangement transaction. This transaction creates the PA contract, transfers debt to it, and sets up the installment amount. This transaction is also used if you need to break or cancel the payment arrangement.