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

A reaffirmation agreement in a Chapter 11 bankruptcy is an agreement between a debtor and a creditor that reaffirms the debtor’s obligation to pay a debt as if no bankruptcy had occurred. This agreement allows the debtor to keep the property that is secured by the debt (such as a car or house). It is an alternative to surrendering the property and having the debt discharged (eliminated) in the bankruptcy. When the debtor reaffirms a debt, the agreement must meet certain criteria under the law. It must be in writing, signed by the debtor, and not unconscionable (unfair). The agreement must also include a statement of the debtor’s rights under the Bankruptcy Code. The debtor must also be provided with a completed copy of the agreement. Reaffirmation agreements can be beneficial to both parties. For the debtor, reaffirming a debt may help him to maintain a good credit rating, as the reaffirmed debt will remain on the debtor’s credit report. This can be important if the debtor is attempting to rebuild his credit after bankruptcy. For the creditor, reaffirmation can be beneficial because it gives the creditor an assurance that the debt will be paid. The court must approve any reaffirmation agreement before it can become legally binding. It is important to note that while a debtor may enter into a reaffirmation agreement with a creditor, he is not legally obligated to do so. If the debtor decides not to reaffirm the debt, he may still keep the secured property and the debt will be discharged in the bankruptcy.

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

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