An agreement by which a party agrees to make payments to another party on a notional principal amount at a fixed or floating rate in exchange for the counterparty’s agreement to make payments based on the inverse rate basis (fixed for floating, floating for fixed). Lenders will often require a debtor that has agreed to pay a floating rate to purchase a swap from a counterparty, (often the lender itself), that will effectively provide the certainty of a fixed rate of interest on the debt. These have proliferated in a low-default environment and so are untested in bankruptcy but may raise interesting issues regarding, among other things, enforceability and whether they can be modified by a plan (especially when the counterparty is the lender).
Bankruptcy Code § 560.