In Chapter 13 bankruptcy, a reduction in the amount of a secured debt the debtor must repay to the replacement value of the collateral securing the debt. For example, if a debtor owes $5,000 on a car that's worth only $3,500, a cramdown would reduce the amount of the debt that had to be repaid in Chapter 13 to $3,500.Category: Bankruptcy, Foreclosure & Debt → Bankruptcy
Nolo’s Plain-English Law Dictionary. Gerald N. Hill, Kathleen Thompson Hill. 2009.
USAcramdown, Also known as crammed down.The mechanism by which a court may confirm (confirmation) a Chapter 11 plan of reorganization over the objections of a dissenting class of creditors, if the plan:• Has been accepted by at least one impaired class.• Does not discriminate unfairly. This generally means that similar claims or interests are treated similarly.• Is fair and equitable:o with respect to secured creditors, this generally requires that the secured creditor receive at least the value of their collateral;o with respect to unsecured creditors, this generally requires satisfaction of the absolute priority rule.In the context of mortgage modifications in connection with the government bailout programs, proposed legislation allowing judges to modify the terms of mortgages for borrowers in bankruptcy court.
Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010.