The Talmud (Gittin 37b) quotes a mishna in Shivi'it (10:8) that states that when a person attempts to return a debt during Shmita, the creditor should say to him "I annul it." But if the debtor says, "Nevertheless, I wish to return it," then the creditor should accept the payment. The Gemara goes on to say that the debtor should be encouraged, or perhaps even pressured, to say "nevertheless" and to return the loan.
This ruling is quite startling. One difficulty is that the Gemara and Sifrei are clear that loans are annulled at the end of the Sabbatical year. Hence the phrase: "One who returns his loan during Shmita," has to be reinterpreted to mean "one who returns his loan after Shmita has passed." Beyond that, regarding the actual annulment itself this case raises questions. What is the meaning of this little dance that the debtor and creditor are doing, and how can it be allowed to make payment of a loan after it has been annulled? To understand more clearly what is going on here, one needs to look at what happens when loans are annulled by the Sabbatical year.
The many passages in the Talmud that discuss the annulment of loans suggest very strongly that the annulment occurs automatically at the end of the year. However, this is not full explicit, and our passage points to a possible role that the creditor might have in this annulment through his declaration, "I annul it." Indeed, the Mordechai quotes an opinion that without this declaration the loan is not annulled. Even when Mordechai rejects this, he does so not through a definitive proof, but by saying, "The matter appears that the loan is annulled automatically," and "I have a tradition that this happens without any statement." Clearly, there is room to argue that the statement of annulment is part of the process, but on the other hand there are so many sources that sound like things happen automatically. Is there a way to resolve this?
I believe that the answer lies in understanding two aspects of what might be meant by annulment of the loan. On the one hand, it is possible that the loan gets completely wiped out. This is what we assume. Interestingly, however, the Torah never says this. The Torah rather says, "He may not exact the loan from his fellow or his brother." This suggests that the loan exists, but it may not be demanded or extracted. It is possible that these two approaches are reflected in the debate of Abbaye and Rava (Gittin 36b) how the Rabbis might have instituted a Rabbinic Shmita and annulled loans, if they really should be collectable. Abbaye states: "Sit and don't act." Rava states: "The court has the power to make property ownerless." That is, according to Abbaye, Rabbinic Shmita, at least, does not annul the loan, but rather restricts the creditor from collecting. According to Rava, however, the actual loan is annulled.
It is also possible that both are true. Perhaps what happens automatically is that the creditor is prohibited from collecting the loan. If, however, the creditor states, "I annul it," then the loan actually gets wiped out. That might be what is happening in our mishna. Because the loan still exists, then although the creditor cannot demand it, if the debtor wants to do the right thing, he will return it nonetheless. Hence the statement in the mishna that "The Sages are pleased with whomever returns a loan during the Sabbatical year." The creditor, on his part, has to then take it to the next step and say, "I annul it," perhaps thereby fulfilling the Biblical command, "Every creditor should release his debts." This, then, wipes the debt clean. Nevertheless, because the creditor is still out his money, it would be good for the debtor to repay it as a gift, and this is what we encourage him to do.
Finally, lulei di'mistafina, I would suggest a reading that is not according to the way we rule, but which fits nicely in the text of the mishna. Although we rule that the Sabbatical year annuls loans only at the end, we must admit that it is quite ironic that a creditor can go through the entire Sabbatical year demanding and collecting his debts. Perhaps this is not the case. Perhaps during the Sabbatical year the creditor is foresworn against collecting based on the verse, "He shall not exact." Nevertheless, the actual annulment of the loan only occurs at the end of the year. This is consistent with the sources that state that the annulment occurs at the end of the year, and it also nicely explains the phrase: "One who comes to return his loan on Shmita." When someone is returning it during the Sabbatical year, the loan still exists, but it cannot be demanded. Then, if the creditor states, "I annul," it gets erased, or, if he does not state this, it will be erased at the end of the year. This, then, also explains the sources that state that the annulment occurs automatically and this source which suggests that it is done via the creditor. The latter is true and necessary during the Sabbatical year itself, the former is what happens, regardless, and the end of the year.