Modification Of Secured Loan Under Cram-Down Chapter 11 Plan Warranted Due To Plan Feasibility Threat

Many recent court rulings concerning the treatment of secured creditors under a chapter 11 plan have focused on "cram-up" plans involving reinstatement of secured loans to avoid impairment (and the ability to vote on the plan) or "cram-down" confirmation involving either the sale of the lender's collateral, subject to the lender's right to "credit bid" its claim, and attachment of its lien to the proceeds, or treating the secured claim in a way that provides the lender with the "indubitable equivalent" of its claim.

A ruling recently handed down by the U.S. Bankruptcy Court for the District of New Jersey explores another avenue to confirmation of a plan over the objection of a secured creditor. In In re Ocean View Motel, LLC, 2022 WL 243213 (Bankr. D.N.J. Jan. 25, 2022), the court ruled that a plan could be confirmed over a secured lender's objection even though a new secured note given to the lender eliminated his prepetition contractual right to file a deed in