What is a “reaffirmation agreement” in a Chapter 11 bankruptcy?

A reaffirmation agreement in a Chapter 11 bankruptcy is a contract between the debtor and the creditor. Under the agreement, the debtor agrees to keep paying the debt despite the bankruptcy filing. This agreement must be accepted by the bankruptcy court before it becomes effective. In most Chapter 11 bankruptcies, creditors are not required to accept a reaffirmation agreement. However, they may be willing to do so if both parties agree to the terms. This agreement may include reduced payments or a different payment schedule. Generally, creditors will accept a reaffirmation agreement if they believe that the debtor can make the payments as agreed. Reaffirmation agreements are beneficial for both the debtor and the creditor. For the debtor, it allows them to protect certain assets that may be subject to liquidation if the debt is not reaffirmed. Additionally, a reaffirmation agreement can help the debtor establish or rebuild their credit after the bankruptcy is complete. For the creditor, a reaffirmation agreement may be used to prove that they are not responsible for the debt. This could mean that the creditor will be more likely to receive payment, although it’s not guaranteed. Additionally, the creditor will be able to report the payments to the credit bureaus, which could increase the debtor’s credit score. Overall, a reaffirmation agreement is an important part of the Chapter 11 bankruptcy process. When used properly, it can provide financial relief to both the debtor and the creditor.

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What is a “reaffirmation agreement” in a Chapter 11 bankruptcy?

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