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The Bankruptcy StrategistKickerFeaturesSectionsNewsLJN Newsletters

You Just Can't Give It Away

By Scott J. Friedman and Mark G. Douglas
July 27, 2005

Part Two of a Two-Part Article

Last month, we explained that the proposition that a creditor can do whatever it wants with its recovery from a Chapter 11 debtor may seem to be a fundamental right — but that in the context of confirmation of a Chapter 11 plan, that right may not be unqualified. It may, in fact, violate well-established bankruptcy principles. We went on to explain that one such principle that applies only in the context of non-consensual confirmation of a Chapter 11 plan, or “cramdown,” is commonly referred to as the “absolute priority rule,” a pre-Bankruptcy Code maxim that established a strict hierarchy of payment among claims of differing priorities.

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