Cramdown

A cramdown is a debt repayment plan that a bankruptcy court forces a bankrupt entity's creditors to accept, typically over the objections of one or more classes of creditors. The terms of this plan involve paying creditors less than the full amount that they are owed, on the grounds that this plan will pay creditors more than would be the case if the bankrupt entity were to liquidate instead. A cramdown is used when an entity files for Chapter 11 bankruptcy protection. A key requirement of a cramdown is that the plan is equitable for all creditors who are owed funds.

The cramdown term is a contraction of the concept of cramming the repayment solution down the throats of creditors, thereby implying that there will be resistance to the plan.

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