A reaffirmation agreement is a side agreement within a bankruptcy case between a debtor and a creditor which states that the debtor agrees to continue making payments on the loan throughout the term of the bankruptcy. It is common for a debtor to agree to repay all his outstanding debt to the creditor, although in some cases, a debtor may agree instead to reduced payments or make payments without the interest. There are certain requirements that must be met in order for a reaffirmation agreement to be considered as valid, and one of these is that it must be entered into before the debtor's discharge of bankruptcy.
The reason why a debtor might want to sign a reaffirmation agreement is in order to allow the creditor to keep the property behind the loan. Otherwise, it would be subject to seizure and sale through normal bankruptcy liquidation procedures. In order to be valid, the reaffirmation agreement must be seen by the court as something that was executed in the best interests of the debtor, and must not be be unduly harsh or unfavorable toward the latter. Apart from this, the debtor also has to confirm that he signed the agreement with his full consent, and must also declare that he was not coerced to do so. The reaffirmaton agreement needs to be filed in court and can be rescinded within 60 days of filing.