Debtor-in-possession

A debtor-in-possession is a debtor who retains possession of their assets and continues to operate their business while undergoing bankruptcy proceedings under Chapter 11 of the U.S. Bankruptcy Code. This status allows the debtor to manage their business and make decisions regarding the assets, provided they act in the best interests of creditors. The debtor-in-possession has certain duties and is subject to court oversight, ensuring transparency and accountability throughout the reorganization process.

Debtor-in-possession meaning with examples

• After filing for Chapter 11 bankruptcy, the restaurant owner became a debtor-in-possession, allowing him to continue operations while restructuring his financial obligations to suppliers and creditors. He implemented new strategies to boost sales, aiming to stabilize the business before eventual terms were negotiated with his creditors.
• In a recent high-profile case, the technology startup was designated as a debtor-in-possession following its bankruptcy filing. During the proceedings, the management worked closely with financial advisors to create a viable plan for recovery, ensuring stakeholder communication remained open and transparent to facilitate trust.
• The court granted the retailer debtor-in-possession status, enabling the company to continue its sales and maintain customer service. By doing so, the leadership aimed to preserve brand reputation while negotiating revised contracts with major suppliers that would help reduce costs significantly.
• During the bankruptcy process, the manufacturer employed its debtor-in-possession authority to implement cost-cutting measures and streamline operations. This proactive approach gave them a chance to pivot their business model, securing the necessary funding to emerge more robustly from the Chapter 11 proceedings.