What is a “cramdown” in a Chapter 11 bankruptcy?

In a Chapter 11 bankruptcy, a “cramdown” is a process by which a debtor (the person filing for bankruptcy) can reduce the amount of debt owed to a creditor (the person owed money) while still satisfying the debt. This allows the debtor to keep some of their property such as a car or home, as well as negotiate better terms on the debt. During a cramdown, the debtor will present their financial information and propose a repayment plan with reduced payments. The creditor then decides whether or not it will accept the proposed plan. If the creditor does not accept the plan, the court may decide whether to approve the plan and reduce the debt owed with a “cramdown”. In South Carolina, a cramdown is only available in Chapter 11 bankruptcy cases. This is different from Chapter 7 cases, where any remaining debt is typically discharged and the debtor is relieved of the responsibility to pay it. It is important to note that a cramdown does not discharge debt. Instead, the debtor will still be responsible for all of the debt that is still owed, just at a lower rate. A cramdown is simply a way for a debtor to reduce their debt to make it more manageable and create an affordable repayment plan.

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What is a “cramdown” in a Chapter 11 bankruptcy?

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