CLFP Collections Practice Exam

What does cramming down allow the court to do in bankruptcy?

Force certain creditors to accept the plan terms Accelerate liquidation Lower debt to zero Extend the plan beyond the deadline

Correct Answer:

Force certain creditors to accept the plan terms

Explanation:

Cramming down lets a bankruptcy court approve a Chapter 11 reorganization plan over the objections of dissenting creditor classes, as long as at least one impaired class votes in favor and the plan meets the Bankruptcy Code’s requirements for fairness and payment to creditors. In short, the court can bind those creditors to accept the plan’s terms when the plan is feasible and not unfairly discriminatory, even if some classes do not vote for it. This is not about wiping out debt to zero, speeding up liquidation, or stretching deadlines—the mechanism specifically overrides objections to confirm a reorganization plan.

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