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 their of 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 creditors are forced to accept a bankruptcy plan that they voted to reject. This can happen if the court finds the plan to be fair and equitable, even if some creditors disagree. The term "cram down" comes from the idea that the plan is being forced on the dissenting creditors, who are getting "crammed down" into accepting it.

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