This provision is often used to obtain a Chapter 11 bankruptcy reorganization plan while there are still objections from one or more creditors. Cramdown allows the bankruptcy courts to modify loan terms in an attempt to have all parties come out better than they would have without such modifications. The conditions are mainly that the new terms are fair and equitable to all parties involved
This provision is often used to obtain a Chapter 11 bankruptcy reorganization plan while there are still objections from one or more creditors. In order for the court to confirm the rejected bankruptcy plan, the debtor must prove that it is fair, equitable and does not discriminate against a class of creditors. A secured creditor must receive the entire value of the asset securing the claim or the entire value of the claim, whichever is smaller, in order for the plan to be considered fair. Unsecured creditors voting by class must either accept the Chapter 11 plan or the owners of the debtor corporation cannot retain an interest in the reorganized debtor under the plan unless they contribute 'new value' to the plan.