"Reaffirming a debt is a serious financial decision. The law requires you to take certain steps to make sure the decision is in your best interest. If these steps are not completed, the reaffirmation agreement is not effective, even though you have signed it.
"Your right to rescind (cancel) your reaffirmation agreement. You may rescind (cancel) your reaffirmation agreement at any time before the bankruptcy court enters a discharge order, or before the expiration of the 60-day period that begins on the date your reaffirmation agreement is filed with the court, whichever occurs later. To rescind (cancel) your reaffirmation agreement, you must notify the creditor that your reaffirmation agreement is rescinded (or canceled).
"What are your obligations if you reaffirm the debt? A reaffirmed debt remains your personal legal obligation. It is not discharged in your bankruptcy case. That means that if you default on your reaffirmed debt after your bankruptcy case is over, your creditor may be able to take your property or your wages. Otherwise, your obligations will be determined by the reaffirmation agreement which may have changed the terms of the original agreement. For example, if you are reaffirming an open end credit agreement, the creditor may be permitted by that agreement or applicable law to change the terms of that agreement in the future under certain conditions.
"Are you required to enter into a reaffirmation agreement by any law? No, you are not required to reaffirm a debt by any law. Only agree to reaffirm a debt if it is in your best interest. Be sure you can afford the payments you agree to make.
"What if your creditor has a security interest or lien? Your bankruptcy discharge does not eliminate any lien on your property. A 'lien' is often referred to as a security interest, deed of trust, mortgage or security deed. Even if you do not reaffirm and your personal liability on the debt is discharged, because of the lien your creditor may still have the right to take the property securing the lien if you do not pay the debt or default on it. If the lien is on an item of personal property that is exempt under your State's law or that the trustee has abandoned, you may be able to redeem the item rather than reaffirm the debt. To redeem, you must make a single payment to the creditor equal to the amount of the allowed secured claim, as agreed by the parties or determined by the court.".
"Part B: Reaffirmation Agreement. I (we) agree to reaffirm the debts arising under the credit agreement described below.
"Brief description of credit agreement:
"Description of any changes to the credit agreement made as part of this reaffirmation agreement:
"Co-borrower, if also reaffirming these debts:
"Accepted by creditor:
"Date of creditor acceptance:".
"I hereby certify that (1) this agreement represents a fully informed and voluntary agreement by the debtor; (2) this agreement does not impose an undue hardship on the debtor or any dependent of the debtor; and (3) I have fully advised the debtor of the legal effect and consequences of this agreement and any default under this agreement.
"Part D: Debtor's Statement in Support of Reaffirmation Agreement.
"I believe this reaffirmation agreement is in my financial interest. I can afford to make the payments on the reaffirmed debt. I received a copy of the Reaffirmation Disclosure Statement in Part A and a completed and signed reaffirmation agreement.".
"I am not represented by an attorney in connection with this reaffirmation agreement.
"I believe this reaffirmation agreement is in my best interest based on the income and expenses I have disclosed in my Statement in Support of this reaffirmation agreement, and because (provide any additional relevant reasons the court should consider):
"Therefore, I ask the court for an order approving this reaffirmation agreement.".
"Court Order: The court grants the debtor's motion and approves the reaffirmation agreement described above.".
11 U.S.C. § 524
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTSSection 524(a) of the House amendment represents a compromise between the House bill and the Senate amendment. Section 524(b) of the House amendment is new, and represents standards clarifying the operation of section 524(a)(3) with respect to community property.Sections 524(c) and (d) represent a compromise between the House bill and Senate amendment on the issue of reaffirmation of a debt discharged in bankruptcy. Every reaffirmation to be enforceable must be approved by the court, and any debtor may rescind a reaffirmation for 30 days from the time the reaffirmation becomes enforceable. If the debtor is an individual the court must advise the debtor of various effects of reaffirmation at a hearing. In addition, to any extent the debt is a consumer debt that is not secured by real property of the debtor reaffirmation is permitted only if the court approves the reaffirmation agreement, before granting a discharge under section 727, 1141, or 1328, as not imposing a hardship on the debtor or a dependent of the debtor and in the best interest of the debtor; alternatively, the court may approve an agreement entered into in good faith that is in settlement of litigation of a complaint to determine dischargeability or that is entered into in connection with redemption under section 722. The hearing on discharge under section 524(d) will be held whether or not the debtor desires to reaffirm any debts.
SENATE REPORT NO. 95-989Subsection (a) specifies that a discharge in a bankruptcy case voids any judgment to the extent that it is a determination of the personal liability of the debtor with respect to a prepetition debt, and operates as an injunction against the commencement or continuation of an action, the employment of process, or any act, including telephone calls, letters, and personal contacts, to collect, recover, or offset any discharged debt as a personal liability of the debtor, or from property of the debtor, whether or not the debtor has waived discharge of the debt involved. The injunction is to give complete effect to the discharge and to eliminate any doubt concerning the effect of the discharge as a total prohibition on debt collection efforts. This paragraph has been expanded over a comparable provision in Bankruptcy Act §14f [section 32(f) of former title 11] to cover any act to collect, such as dunning by telephone or letter, or indirectly through friends, relatives, or employers, harassment, threats of repossession, and the like. The change is consonant with the new policy forbidding binding reaffirmation agreements under proposed 11 U.S.C. 524(b), and is intended to insure that once a debt is discharged, the debtor will not be pressured in any way to repay it. In effect, the discharge extinguishes the debt, and creditors may not attempt to avoid that. The language "whether or not discharge of such debt is waived" is intended to prevent waiver of discharge of a particular debt from defeating the purposes of this section. It is directed at waiver of discharge of a particular debt, not waiver of discharge in toto as permitted under section 727(a)(9).Subsection (a) also codifies the split discharge for debtors in community property states. If community property was in the estate and community claims were discharged, the discharge is effective against community creditors of the nondebtor spouse as well as of the debtor spouse.Subsection (b) gives further effect to the discharge. It prohibits reaffirmation agreements after the commencement of the case with respect to any dischargeable debt. The prohibition extends to agreements the consideration for which in whole or in part is based on a dischargeable debt, and it applies whether or not discharge of the debt involved in the agreement has been waived. Thus, the prohibition on reaffirmation agreements extends to debts that are based on discharged debts. Thus, "second generation" debts, which included all or a part of a discharged debt could not be included in any new agreement for new money. This subsection will not have any effect on reaffirmations of debts discharged under the Bankruptcy Act [former title 11]. It will only apply to discharges granted if commenced under the new title 11 bankruptcy code.Subsection (c) grants an exception to the anti-reaffirmation provision. It permits reaffirmation in connection with the settlement of a proceeding to determine the dischargeability of the debt being reaffirmed, or in connection with a redemption agreement permitted under section 722. In either case, the reaffirmation agreement must be entered into in good faith and must be approved by the court.Subsection (d) provides the discharge of the debtor does not affect co-debtors or guarantors.
REFERENCES IN TEXTThe Bankruptcy Act, referred to in subsec. (b)(1), is act July 1, 1898, ch. 541, 30 Stat. 544, as amended, which was classified generally to former Title 11.The date of the enactment of this subsection, referred to in subsec. (g)(7), is the date of enactment of Pub. L. 103-394 which enacted subsec. (g) and was approved Oct. 22, 1994.The date of the enactment of this Act, referred to in subsec. (h), probably means the date of enactment of Pub. L. 103-394 which enacted subsec. (h) and was approved Oct. 22, 1994.The Truth in Lending Act, referred to in subsec. (k), is title I of Pub. L. 90-321, May 29, 1968, 82 Stat. 146, as amended, which is classified generally to subchapter I (§1601 et seq.) of chapter 41 of Title 15, Commerce and Trade. Sections 103, 127(b), and 128(a)(4) of the Act are classified to sections 1602, 1637(b), and 1638(a)(4), respectively, of Title 15. For complete classification of this Act to the Code, see Short Title note set out under sectionof Title 15 and Tables.Section 19(b)(1)(A)(iv) of the Federal Reserve Act, referred to in subsecs. (k)(6)(B) and (m)(2), is classified to section of Title 12, Banks and Banking.
AMENDMENTS2019-Subsec. (a)(1). Pub. L. 116-54, §4(a)(9)(A)(i), inserted "1192," after "1141,".Subsec. (a)(3). Pub. L. 116-54, §4(a)(9)(A)(ii), inserted "1192," after "523,".Subsec. (c)(1). Pub. L. 116-54, §4(a)(9)(B), inserted "1192," after "1141,".Subsec. (d). Pub. L. 116-54, §4(a)(9)(C), inserted "1192," after "1141," in introductory provisions.2010-Subsec. (k)(3)(J)(i). Pub. L. 111-327, §2(a)(19)(A), in last undesignated par., substituted "property securing the lien" for "security property" and "amount of the allowed secured claim" for "current value of the security property" and inserted "must" before "make a single payment".Subsec. (k)(5)(B). Pub. L. 111-327, §2(a)(19)(B), substituted "that," for "that".2005-Subsec. (a)(3). Pub. L. 109-8, §1210, substituted "section 523, 1228(a)(1), or 1328(a)(1), or that" for "section , ,or of this title, or that".Subsec. (c)(2). Pub. L. 109-8, §203(a)(1), added par. (2) and struck out former par. (2) which read as follows:"(2)(A) such agreement contains a clear and conspicuous statement which advises the debtor that the agreement may be rescinded at any time prior to discharge or within sixty days after such agreement is filed with the court, whichever occurs later, by giving notice of rescission to the holder of such claim; and"(B) such agreement contains a clear and conspicuous statement which advises the debtor that such agreement is not required under this title, under nonbankruptcy law, or under any agreement not in accordance with the provisions of this subsection;".Subsecs. (i), (j). Pub. L. 109-8, §202, added subsecs. (i) and (j).Subsecs. (k) to (m). Pub. L. 109-8, §203(a)(2), added subsecs. (k) to (m).1994-Subsec. (a)(3). Pub. L. 103-394, §501(d)(14)(A), substituted "1328(a)(1)" for "1328(c)(1)". See 1986 Amendment note below.Subsec. (c)(2). Pub. L. 103-394, §103(a)(1), designated existing provisions as subpar. (A), inserted "and" at end, and added subpar. (B).Subsec. (c)(3). Pub. L. 103-394, §103(a)(2), struck out "such agreement" after "which states that" in introductory provisions, struck out "and" at end of subpar. (A), inserted "such agreement" in subpars. (A) and (B), and added subpar. (C).Subsec. (c)(4). Pub. L. 103-394, §501(d)(14)(B), substituted "rescission" for "recission".Subsec. (d). Pub. L. 103-394, §103(b), inserted "and was not represented by an attorney during the course of negotiating such agreement" after "this section" in introductory provisions.Subsec. (d)(1)(B)(ii). Pub. L. 103-394, §501(d)(14)(C), inserted "and" at end.Subsecs. (g), (h). Pub. L. 103-394, §111(a), added subsecs. (g) and (h).1986-Subsec. (a)(1). Pub. L. 99-554, §257(o)(1), inserted reference to section of this title.Subsec. (a)(3). Pub. L. 99-554, §257(o)(2), which directed the substitution of ", 1228(a)(1), or 1328(a)(1)" for "or 1328(a)(1)" was executed by making the substitution for "or 1328(c)(1)" to reflect the probable intent of Congress. See 1994 Amendment note above.Subsec. (c)(1). Pub. L. 99-554, §257(o)(1), inserted reference to section of this title.Subsec. (d). Pub. L. 99-554, §257(o)(1), inserted reference to section of this title.Pub. L. 99-554, §282, substituted "shall" for "may" before "hold" in first sentence, inserted "any" after "At" in second sentence, and inserted "the court shall hold a hearing at which the debtor shall appear in person and" after "then" in third sentence.Subsec. (d)(2). Pub. L. 99-554, §283(k), substituted "section" for "subsection" after "subsection (c)(6) of this".1984-Subsec. (a)(2). Pub. L. 98-353, §§308(a), 455, struck out "or from property of the debtor," before "whether or not discharge", and substituted "an act" for "any act".Subsec. (a)(3). Pub. L. 98-353, §455, substituted "an act" for "any act".Subsec. (c)(2). Pub. L. 98-353, §308(b)(1), (3), added par. (2). Former par. (2), which related to situations where the debtor had not rescinded the agreement within 30 days after the agreement became enforceable, was struck out.Subsec. (c)(3), (4). Pub. L. 98-352, §308(b)(3), added pars. (3) and (4). Former pars. (3) and (4) redesignated (5) and (6), respectively.Subsec. (c)(5). Pub. L. 98-353, §308(b)(2), redesignated former par. (3) as (5).Subsec. (c)(6). Pub. L. 98-353, §308(b)(2), (4), redesignated former par. (4) as (6) and generally amended par. (6), as so redesignated, thereby striking out provisions relating to court approval of such agreements as are entered into in good faith and are in settlement of litigation under section of this title or provide for redemption under section of this title.Subsec. (d)(2). Pub. L. 98-353, §308(c), substituted "subsection (c)(6)" for "subsection (c)(4)".Subsec. (f). Pub. L. 98-353, §308(d), added subsec. (f).
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2019 AMENDMENTAmendment by Pub. L. 116-54 effective 180 days after Aug. 23, 2019, see section 5 of Pub. L. 116-54 set out as a note under sectionof this title.
EFFECTIVE DATE OF 2005 AMENDMENTAmendment by Pub. L. 109-8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under this title before such effective date, except as otherwise provided, see section 1501 of Pub. L. 109-8 set out as a note under sectionof this title.
EFFECTIVE DATE OF 1994 AMENDMENTAmendment by Pub. L. 103-394 effective Oct. 22, 1994, and, except with respect to amendment by section 111(a) of Pub. L. 103-394 amendment by Pub. L. 103-394 not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394 set out as a note under sectionof this title.
EFFECTIVE DATE OF 1986 AMENDMENTAmendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554 set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure.Amendment by sections 282 and 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554.
EFFECTIVE DATE OF 1984 AMENDMENTAmendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353 set out as a note under sectionof this title.
CONSTRUCTION Pub. L. 103-394, title I, §111(b), Oct. 22, 1994, 108 Stat. 4117, provided that: "Nothing in subsection (a), or in the amendments made by subsection (a) [amending this section], shall be construed to modify, impair, or supersede any other authority the court has to issue injunctions in connection with an order confirming a plan of reorganization."
- The term "affiliate" means-(A) entity that directly or indirectly owns, controls, or holds with power to vote, 20 percent or more of the outstanding voting securities of the debtor, other than an entity that holds such securities-(i) in a fiduciary or agency capacity without sole discretionary power to vote such securities; or(ii) solely to secure a debt, if such entity has not in fact exercised such power to vote;(B) corporation 20 percent or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by the debtor, or by an entity that directly or indirectly owns, controls, or holds with power to vote, 20 percent or more of the outstanding voting securities of the debtor, other than an entity that holds such securities-(i) in a fiduciary or agency capacity without sole discretionary power to vote such securities; or(ii) solely to secure a debt, if such entity has not in fact exercised such power to vote;(C) person whose business is operated under a lease or operating agreement by a debtor, or person substantially all of whose property is operated under an operating agreement with the debtor; or(D) entity that operates the business or substantially all of the property of the debtor under a lease or operating agreement.
- The term "attorney" means attorney, professional law association, corporation, or partnership, authorized under applicable law to practice law.(4A) The term "bankruptcy assistance" means any goods or services sold or otherwise provided to an assisted person with the express or implied purpose of providing information, advice, counsel, document preparation, or filing, or attendance at a creditors' meeting or appearing in a case or proceeding on behalf of another or providing legal representation with respect to a case or proceeding under this title.
- The term "claim" means-(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.
- community claim
- The term "community claim" means claim that arose before the commencement of the case concerning the debtor for which property of the kind specified in section 541(a)(2) of this title is liable, whether or not there is any such property at the time of the commencement of the case.(7A) The term "commercial fishing operation" means-(A) the catching or harvesting of fish, shrimp, lobsters, urchins, seaweed, shellfish, or other aquatic species or products of such species; or(B) for purposes of section 109 and chapter 12, aquaculture activities consisting of raising for market any species or product described in subparagraph (A).(7B) The term "commercial fishing vessel" means a vessel used by a family fisherman to carry out a commercial fishing operation.
- consumer debt
- The term "consumer debt" means debt incurred by an individual primarily for a personal, family, or household purpose.
- The term "debt" means liability on a claim.(12A) The term "debt relief agency" means any person who provides any bankruptcy assistance to an assisted person in return for the payment of money or other valuable consideration, or who is a bankruptcy petition preparer under section 110, but does not include-(A) any person who is an officer, director, employee, or agent of a person who provides such assistance or of the bankruptcy petition preparer;(B) a nonprofit organization that is exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1986;(C) a creditor of such assisted person, to the extent that the creditor is assisting such assisted person to restructure any debt owed by such assisted person to the creditor;(D) a depository institution (as defined in section 3 of the Federal Deposit Insurance Act) or any Federal credit union or State credit union (as those terms are defined in section 101 of the Federal Credit Union Act), or any affiliate or subsidiary of such depository institution or credit union; or(E) an author, publisher, distributor, or seller of works subject to copyright protection under title 17, when acting in such capacity.
- The term "debtor" means person or municipality concerning which a case under this title has been commenced.(13A) The term "debtor's principal residence"-(A) means a residential structure if used as the principal residence by the debtor, including incidental property, without regard to whether that structure is attached to real property; and(B) includes an individual condominium or cooperative unit, a mobile or manufactured home, or trailer if used as the principal residence by the debtor.
- The term "entity" includes person, estate, trust, governmental unit, and United States trustee.
- The term "lien" means charge against or interest in property to secure payment of a debt or performance of an obligation.
- The term "petition" means petition filed under section 301, 302, 303 and 3 1504 of this title, as the case may be, commencing a case under this title.(42A) The term "production payment" means a term overriding royalty satisfiable in cash or in kind-(A) contingent on the production of a liquid or gaseous hydrocarbon from particular real property; and(B) from a specified volume, or a specified value, from the liquid or gaseous hydrocarbon produced from such property, and determined without regard to production costs.
- security interest
- The term "security interest" means lien created by an agreement.(51A) The term "settlement payment" means, for purposes of the forward contract provisions of this title, a preliminary settlement payment, a partial settlement payment, an interim settlement payment, a settlement payment on account, a final settlement payment, a net settlement payment, or any other similar payment commonly used in the forward contract trade.(51B) The term "single asset real estate" means real property constituting a single property or project, other than residential real property with fewer than 4 residential units, which generates substantially all of the gross income of a debtor who is not a family farmer and on which no substantial business is being conducted by a debtor other than the business of operating the real property and activities incidental thereto.(51C) The term "small business case" means a case filed under chapter 11 of this title in which the debtor is a small business debtor and has not elected that subchapter V of chapter 11 of this title shall apply.(51D) The term "small business debtor"-(A) subject to subparagraph (B), means a person engaged in commercial or business activities (including any affiliate of such person that is also a debtor under this title and excluding a person whose primary activity is the business of owning single asset real estate) that has aggregate noncontingent liquidated secured and unsecured debts as of the date of the filing of the petition or the date of the order for relief in an amount not more than $2,000,000 1 (excluding debts owed to 1 or more affiliates or insiders) not less than 50 percent of which arose from the commercial or business activities of the debtor; and(B) does not include-(i) any member of a group of affiliated debtors that has aggregate noncontingent liquidated secured and unsecured debts in an amount greater than $2,000,000 1 (excluding debt owed to 1 or more affiliates or insiders);(ii) any debtor that is a corporation subject to the reporting requirements under section 13 or 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m, 78o(d) ); or(iii) any debtor that is an affiliate of an issuer (as defined in section 3 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c )).