May 31, 2016
The absolute priority rule is relevant in Chapter 11 cases where the debtor attempts to “cram down” a Chapter 11 plan over the objection of dissenting unsecured creditors. It is best to start with the requirements for confirmation. 11 USC 1129 addresses confirmation of a chapter 11 plan. 11 USC 1129(a) states, in relevant part:
(a) The court shall confirm a plan only if all of the following requirements are met:
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(8) With respect to each class of claims or interests —
(A) such class has accepted the plan; or
(B) such class is not impaired under the plan.
11 USC 1129(b) allows for nonconsensual confirmation, or "cramdown," if at least one impaired class votes in favor of the plan. 11 USC 1129(b) states: