Absolute Priority Rule

Abstract

This paper explains a basic principle of Bankruptcy Law that absolute priority rule comes into operation when a class of similar situated creditors do not agree with the plan. The Court will only confirm a plan over the objections of this dissenting group of creditors if the dissenting creditors are paid in full or if no one with a claim or interest that is junior to the claims of the dissenting creditor will get or retain anything under the plan. Cram down is a court confirmation of a Chapter 11 bankruptcy plan despite the opposition of certain creditors. Under the Bankruptcy Code, a court may confirm a plan, even if it has not been accepted by all clauses of creditors___if the plan,-(1) has been accepted by at least one impaired class, (2) does not discriminate unfairly, and (3) is fair and equitable.