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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The key to understanding the structure of the mechanism is the cramdown feature.
But although then-Senator Obama endorsed cramdown on the campaign trail, he supported a bailout package that deferred the provision until after the elections.
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).
Together with the cramdown provision, this requirement obligates the court to select a rate high enough to compensate the creditor for its risk.
Although [section] 1129(b)(2)(A)(ii) expressly incorporates the [section] 363(k) credit bid right into non-consensual plans, the debtor argued that the proposal satisfied another route to cramdown.
The final Part concludes that the Americans should consider adopting the English Carve-out, the English should consider adopting the American cramdown, and both should consider improvements to their security interest registration systems.
RadLAX sought court approval of a cramdown plan in which it would sell the hotel and parking structure at auction to the highest bidder free and clear of Amalgamated Bank's lien, and then use the proceeds to pay Amalgamated back.
See David Dayen, Pro Publica Advances Narrative on How Obama Killed Cramdown, FDL NEWS DESK (Feb.
But there is a cramdown option which can force dissenters to accept the plan once creditors holding 75 percent of the debt agree to it - a level Drydocks had reached before it began legal proceedings.
Instituting a policy of mortgage cramdown during the midst of the crisis would have reduced the remaining flow of private sector mortgage finance.
The type of loan modification under consideration is known as a loan cramdown or loan stripdown because the judge would reduce the balance of the secured claim to the current market value of the house, turning the remaining balance of the mortgage into an unsecured claim (which would receive the same proportionate payout as other unsecured debts included in the bankruptcy petition).
47) Indeed, it is highly doubtful that our bankruptcy courts could handle the job Congress would be giving them if so-called cramdown legislation were adopted, at least not if it were adopted without first having a plan like the one I propose up and running to handle the vast majority of underwater homeowners.