What is “cramdown” in a Chapter 11 bankruptcy?

Cramdown, also known as "binding confirmation," is a process that occurs in Chapter 11 bankruptcy in Utah. Through this process, a court can approve a plan of reorganization, where a debtor can modify the terms of some of its debts in order to meet the requirements of its creditors and emerge from bankruptcy. In a cramdown, the debtor must prove that the revised terms of a loan or contract are fair and reasonable to its creditors. This may include modifying interest rates, payments, amortization dates, or other elements of a loan or contract. If a court finds that the new terms are fair and reasonable, it can then approve the plan, and creditors become legally bound by the revised terms. When a debtor files a petition for Chapter 11 bankruptcy, its creditors can challenge the plan of reorganization. However, with a successful cramdown, the creditors must accept the revised terms of the plan. In other words, they must accept the changes proposed by the debtor and cannot reject them. This can help the debtor to emerge from bankruptcy more quickly and with less strain on its finances.

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What is “cramdown” in a Chapter 11 bankruptcy?

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