What is Cramdown?

Cramdown is a slang term concerning discretional powers that can be used by an bankruptcy court when the company attempts to submit a reorganization plan. In principle, situations where the court decides to confirm or change the reorganization plan, although some of the creditors involved have serious objections to the final draft plan. Kramdown can be used when the court decides that a company looking for protection against bankruptcy is making a sincere effort to make the best it can to recover from financial failure and continue to work.

While Cramdown is not an unusual phenomenon, most courts decide to use this ability. The court often entertains detailed explanations from creditors about why the plan is not acceptable to one or more creditors classes. At the same time, the Court seeks protection from the court through bankruptcy, in an effort to find out all factories relevant to the reorganization. The court will generally try to convey the situation so that societyThe creditors could also support the plan. However, if this is not possible, the court may decide to initiate disruption and solve the problem.

Cramdown may be in favor of a plan presented by a company or an alternative plan that represents the creditors' class. It is also possible for the court to determine that the third plan of reorganization, which includes elements of previously submitted plans. Finally, the court will try to approve a plan that is in the best interest of all parties concerned.

As soon as the court has been disturbed, the reorganization plan is approved and the bankruptcy process will continue. In the event that the Company fails to meet the conditions specified in the approved plan, the court may also take up the added actions to help protect the rights of the creditors, even if the company has concluded the initial situation.