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

A reaffirmation agreement is a type of legal agreement that can be entered into during a Chapter 11 bankruptcy case. It is a voluntary agreement between a debtor and a creditor, where the debtor agrees to give up their automatic right to discharge a debt and pays the creditor back the full amount of the debt, plus any applicable interest. Reaffirmation agreements allow debtors to keep certain assets that would otherwise be part of the bankruptcy estate, such as a house or car. The agreement is also signed in court, witnessed by a court official, and filed with the court. Creditors may sometimes try to pressure debtors into these agreements, but the law requires that reaffirmation agreements are entered into voluntarily and it is up to the debtor to choose if they want to enter into one or not. A debtor can also negotiate with their creditor for better terms when signing a reaffirmation agreement, such as a lower interest rate or reduced payments. Debtors should be aware that any payments they make on the debt after signing the agreement will be considered as part of their repayment and those payments may not be discharged if the debt is later discharged in bankruptcy. In some cases, the court may decide that the reaffirmation agreement is not in the best interests of the debtor or creditors and can deny the agreement.

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

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