Duhaime's Law Dictionary

Cramdown Definition:

In a bankruptcy proceeding, forcing a secured creditor to lose his collateral and instead to take a specified cash payment.

A term of American bankruptcy law.

In re Howard, Justice Posner noted:

"[C]ramdown ... means forcing a secured creditor to take cash in lieu of his collateral. The bankruptcy judge first determines the market value of the collateral. The creditor's claim is treated as a secured claim to the extent of that value. If the value is less than the unpaid balance of the secured loan, the difference is demoted to being an unsecured claim of the creditor. In a Chapter 13 bankruptcy, the debtor gets to keep the collateral over the objection of his creditor, provided that the plan requires him to make payments (for example, monthly) to the creditor equivalent to the market value of the collateral, as calculated by the court."

In Philadelphia Newspapers, Justice Fisher of the United States Court of Appeals, Third Circuit, described the origin of the term:

"(The Bankruptcy Code of the United States, at §1129(b)) provides circumstances under which a reorganization plan can be confirmed over the objection of secured creditors - a process referred to as a cramdown because the secured claims are reduced to the present value of the collateral, while the remainder of the debt becomes unsecured, forcing the secured creditor to accept less than the full value of its claim and thereby allowing the plan to be crammed down the throats of objecting creditors. The (Bankruptcy Code) requires the court to assess whether the proposed treatment of the secured claims is fair and equitable."


  • In re Howard, 597 F. 3d 852 (United States Court of Appeals, 2010)
  • In re Philadelphia Newspapers, 599 F. 3d 298 (2010)

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