Which one of these describes a bankruptcy situation known as a "cram down"?
A)The absolute priority rule forces common shareholder claims to the very bottom of the payee list.
B)Creditors are forced to accept a bankruptcy plan that they voted to reject.
C)The filing firm can be forced by the court to accept a plan submitted by the firm's creditors.
D)Shareholders are forced to forfeit all of their claims on the bankrupt firm.
E)A firm submits a reorganization plan simultaneously with its bankruptcy petition thereby forcing the court to agree to the submitted plan.

Question

Quizplus · Accepted Answer

A "cram down" is a situation where a bankruptcy court imposes a reorganization plan on creditors, even if they vote to reject it. This allows the debtor to "cram down" the plan on dissenting creditors, as long as the plan meets certain requirements under the Bankruptcy Code. The term comes from the idea that the debtor is "cramming down" the plan on unwilling creditors.

Which One of These Describes a Bankruptcy Situation Known as a "Cram