Absolute Priority Rule

The principle of bankruptcy law requiring the claims of a dissenting class of creditors to be paid in full before any class of creditors junior to such dissenting class may receive or retain any property in satisfaction of their claims (§ 1129(b)(2), Bankruptcy Code). It prevents a plan of reorganization from being crammed down on unsecured creditors unless equity security holders, who are junior in priority to unsecured creditors, receive no distributions. A corollary to the absolute priority rule prohibits a plan of reorganization from paying more to a class than what it is owed (though this principle is not expressly stated in the Bankruptcy Code).