Cramdown


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Cramdown

The ability of the bankruptcy court to confirm a plan of reorganization over the objections of some classes of creditors. This often involves resetting the amount of principal that the bond holders are owed. Related is a mortgage cramdown. Here the home owner cannot pay the mortgage because of financial distress and, indeed, the mortgage could be a higher value than the house. A cramdown resets (lower) the principal amount of the mortgage. This may allow the homeowner to stay in the house (avoid foreclosure).

Cramdown

In bankruptcy, the ability of a court to formulate and implement a Chapter 11 reorganization plan over and above the objections of creditors. Generally speaking, unsecured creditors object to a debtor's bankruptcy because they have no recourse for retrieving the debt. The rationale behind a cramdown is the fact that unsecured creditors will usually receive part of the debt back under a Chapter 11 reorganization, but would receive nothing in a Chapter 7 liquidation. Cramdown is therefore thought to be the least negative option for both the debtor and the creditors. Courts are required, however, to formulate a cramdown that is as equitable as possible for all parties.
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Some argued that the government should either force them to do so as a condition of receiving bailout money or else allow judges to impose cramdowns of mortgages in bankruptcy (in most bankruptcies home mortgages remain exempt from restructuring).
This concern also makes us wary of the preemptive cramdown proposals.
In an 8-0 decision from which Justice Anthony Kennedy abstained, the Supreme Court on May 29 agreed that a cramdown plan must allow a secured creditor to credit bid.
It seems clear that the principal economic policymakers in the administration--including Treasury Secretary Geithner and former NEC Chair Larry Summers--did not see cramdown as a viable housing strategy.
247), the court permitted the provision because "if the class accepts, the Plan proponent is saved the expense and uncertainty of a cramdown fight.
The outlook for the program's The likely effectiveness of the effectiveness improves if it is provision to pay borrowers who viewed as the "carrot" in continue to make payments as agreed connection with the "stick" of following modification is proposed bankruptcy cramdown questionable.
Part III reviews legal issues faced during the cross-border insolvencies of developers, including: (i) substantive consolidation; (ii) debtor-in-possession (DIP) financing; (iii) the extension of the stay of proceedings, particularly when a landlord "goes dark"; (iv) executory contracts; and (v) cramdown provisions.
It also contains the six bankruptcy-related decisions handed down by the Supreme Court in 2003-2004; these concerned debtor attorneys' fees in a converted Chapter 11 case, preferences in an ERISA defense, individual partner liability for unpaid partnership taxes, waiver of deadline for objecting to debtor's discharge, Cramdown interest rate for secured lenders, and sovereign immunity not triggered in a discharge proceeding.
As a remedy, Lopucki and Whitford propose a "preemptive cramdown" procedure whereby even before a reorganization plan is proposed, the court would determine whether any particular claims or interests would be entitled to a share of the distribution in a cramdown.
ruled that the appropriate valuation standard for a Chapter 13 cramdown,
As we explain below, we consider this difference to be compensatory for the English lack of cramdown.
principal, but did include a cramdown provision with respect to