What is an impaired claim?
An impaired claim is a claim that is impaired by the terms of a Chapter 11 plan. A claim is impaired by a plan if the rights of the creditor to enforce its claim are diminished or materially changed by the plan. A claim that is not paid in full under a plan is an impaired claim. Even if a claim is paid in full under a plan, the claim is considered to be impaired if the original maturity date or any other obligation contained in the agreement upon which the claim is based is not met under the terms of the plan. However, a debtor is permitted to cure a defaulted note, mortgage, or other obligation so that the creditor’s claim is no longer impaired. A defaulted obligation is deemed to be cured and not impaired by a plan if the obligation is made current, the creditor is compensated for any expenses incurred by reason of the debtor’s default, and the rights of the creditor under the obligation are thereafter unaltered.
