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

A reaffirmation agreement in a Chapter 11 bankruptcy is a written agreement between a debtor and a creditor that requires the debtor to pay a debt that has been discharged in the bankruptcy. This agreement must be filed with the court for approval and is binding on both the debtor and the creditor. A reaffirmation agreement is typically used when a debtor wants to keep certain property that is secured by a loan, such as a car or home. The creditor agrees to allow the debtor to keep the property and the debtor agrees to pay the debt despite the fact that it has been discharged in the bankruptcy. The debtor must continue making payments on the loan and the reaffirmation agreement is considered a “new” loan between the debtor and the creditor. When filing for Chapter 11 bankruptcy in Virginia, the debtor must file a motion for court approval of the reaffirmation agreement. A hearing is held to determine if the agreement is in the best interests of the debtor and the creditor. The court will take several factors into consideration, such as the value of the property, the debtor’s income and expenses, and the ability of the debtor to make the payments on the loan. If approved, the agreement must be signed by the debtor and the creditor and filed with the court. The agreement is then legally binding on both parties.

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

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