Bankruptcy Client Alert:- Looking a Gift Horse in the Mouth: Second Circuit Finds Class-Skipping Gift Violates Absolute Priority Rule

The Bankruptcy Code sets forth the relative priority of claims against a debtor and the waterfall in which such claims are typically paid. In order for a court to confirm a plan over a dissenting class of creditors – what is commonly called a “cram-down” – the Bankruptcy Code demands that either (i) the dissenting class receives the full value of its claim, or (ii) no classes junior to that class receive any property under the plan on account of their junior claims or interests. This is known as the “absolute priority rule.” Click here for more..