What is “cramdown” in a Chapter 11 bankruptcy?

Cramdown is a term used to describe a provision of Chapter 11 bankruptcy law in New York. Specifically, it allows a debtor to modify the terms of a secured debt. It applies when the debtor has a loan that is backed by collateral, like a car or a home, and the loan value is more than the actual value of the collateral. In this situation, the bankruptcy court can “cramdown” the loan and reduce the total debt to the estimated market value of the collateral. This means that the debtor only has to repay the amount of debt equal to the value of the collateral, instead of the full amount owed. This provision of Chapter 11 bankruptcy law can be very beneficial for debtors, as it allows them to keep their collateral while reducing the amount of debt they owe. This can help them get out of debt quicker and with less financial hardship. It can also help to prevent creditors from seizing their collateral, which would otherwise result in them losing it. Overall, cramdown is an important part of Chapter 11 bankruptcy law in New York. It gives debtors an option for debt relief in situations where they would otherwise be unable to keep their collateral or where the loan value is much greater than the collateral value. In these cases, creditors are often willing to accept the “cramdown” of the loan and accept a lesser amount, which can ultimately help debtors get out of debt quicker.

Related FAQs

Is there a means test for Chapter 11 bankruptcy?
What is “pre-bankruptcy planning” in a Chapter 11 bankruptcy?
What is debtor-in-possession (DIP) financing?
How does a debtor-in-possession loan work in a Chapter 11 bankruptcy?
What is “debtor in possession” financing?
How do I avoid having my case dismissed in a Chapter 11 bankruptcy?
What is a “prepackaged bankruptcy”?
When must I pay my creditors during a Chapter 11 bankruptcy?
How long does a debtor have to confirm a plan in a Chapter 11 bankruptcy?
What are the requirements for filing a Chapter 11 bankruptcy?

What is “cramdown” in a Chapter 11 bankruptcy?

Related FAQs

Related Blog Posts