Artificial Impairment

An impairment of the rights of a class under a Chapter 11 plan that is de minimis or proposed with a motive to “manufacture” an impaired class to satisfy the One-Impaired-Class-Must-Accept-The-Plan Rule. Courts are divided on whether artificial impairment is permissible, with more recent cases holding that artificial impairment is permissible so long as the plan otherwise meets the good faith requirement of Code § 1129(a)(3).

Code § 1124. See also Cramdown, Impairment, One-Impaired-Class-Must-Accept-The-Plan Rule.

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