What is “cramdown” in a Chapter 11 bankruptcy?

Cramdown is a legal term used in Chapter 11 bankruptcy cases. It is when a bankruptcy court approves a reorganization plan that allows a debtor to reduce the amount owed on its secured debt. A secured debt is one that is backed by collateral, such as a car loan. A cramdown is like refinancing a loan. It allows the debtor to pay off the loan at a lower rate, or with more favorable terms, than what was originally agreed to. In order for a cramdown to be approved, the court must determine that the reorganization plan is “fair and equitable.” This means that the plan must be in the best interest of the debtor’s creditors. The court also looks at the value of the collateral and examines how much the creditors are receiving compared to how much they are losing. If the court determines that the reorganization plan is fair and equitable, it will approve the cramdown. Cramdown is particularly helpful for Chapter 11 debtors in Washington, as it allows them to restructure their debts and keep their businesses afloat. It is important to note, however, that while a cramdown may reduce the amount of debt owed to creditors, it does not reduce the length of the repayment term. Debtors will still need to make payments on the debt as agreed to in the cramdown.

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What is “cramdown” in a Chapter 11 bankruptcy?

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