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

A "cramdown" is a term used in Chapter 11 Bankruptcy Law in Virginia. It refers to a court order that reduces the amount of a loan, such as a mortgage loan, to equal the current market value of a property or other asset securing the loan. This decreases the amount owed by the debtor, providing a more favorable repayment of the loan for the debtor. The cramdown is used when a debtor’s assets are worth less than what is owed on a loan. For example, if a debtor has a loan for $200,000 and the market value of the property securing the loan is worth $150,000, the debtor could ask the court to reduce the loan to the market value of $150,000. This decreases the debt owed by the debtor to $150,000, providing a more favorable repayment of the loan for the debtor. The cramdown is used as a last resort when other methods, such as loan modification or bankruptcy reaffirmation, have failed to resolve the debt. It is important to keep in mind that this does not eliminate the debt; it simply reduces the amount owed to a more affordable amount for the debtor. Cramdowns are also subject to certain restrictions and must be approved by the court before they can be implemented.

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

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