Reaffirmation Agreement [Bankruptcy] Law and Legal Definition

A reaffirmation agreement is a written contract entered voluntarily between a Chapter 7 debtor and a creditor. Here the debtor promises to pay all or a portion of the money that s/he owes to the creditor, regardless of the bankruptcy filing. By a reaffirmation agreement the debtor agrees to make payments throughout the course of the bankruptcy proceedings until complete satisfaction and accomplishment of all money or obligations owed. The purpose of filing a reaffirmation agreement is to allow a creditor keep with him/her the collateral or mortgaged property which would otherwise be subject to repossession. A reaffirmation agreement helps a debtor to waive the discharge of debt which would otherwise be discharged in the pending bankruptcy proceeding.

A reaffirmation agreement which does not comply fully with 11 USCS § 524 is void and unenforceable. A reaffirmation agreement is enforceable only if:

(1) the agreement was made in advance of the debtor's discharge;

(2) the agreement contains a clear and conspicuous statement advising the debtor that the agreement may be rescinded at any time prior to discharge or within sixty days after the agreement is filed with the court, whichever occurs later;

(3) the agreement has been filed with the court;

(4) the debtor has not rescinded the agreement;

(5) the debtor has been warned by the bankruptcy judge as to the effects of the agreement;

(6) the court finds that the agreement does not impose an undue hardship on the debtor; and

(7) the court finds that the agreement is in the debtor's best interest [In re Noble, 182 B.R. 854 (Bankr. D. Wash. 1995)].

The purpose behind imposing these statutory requirements are to prevent debtors from being coerced into signing reaffirmation agreements and to enable them to be fully aware of the consequences of the agreement.