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What is a debtor in possession in a Chapter 11 bankruptcy?

Whether you run a corporation in Illinois, are the sole proprietor of a business or are involved in a partnership, you may run into tough financial situations where you are forced to consider bankruptcy as a way to clear your debt. Chapter 11 bankruptcy is designed to help these types of businesses reorganize debt in such a way that it can be repaid in a timely manner, and the company can continue on with its business endeavors. When filing Chapter 11 bankruptcy, you may actually become a debtor in possession, which requires you to take over many of the responsibilities associated with the case.

According to U.S. Courts, the debtor who files for Chapter 11 bankruptcy may be asked to perform certain duties as a debtor in possession. These are things that a court-appointed trustee would usually handle, and include the following:

  •          Examining claims and objecting to them as necessary.
  •          Listing and evaluating property associated with the case.
  •          Submitting any reports and/or documentation that is required for the case.

The debtor in possession is also able to hire certain professionals to help with the case, such as accountants, auctioneers, attorneys and appraisers. Rather than perform these duties themselves, the trustee who is appointed to the case must monitor the actions of the debtor in possession to ensure he or she is doing everything properly.

As a debtor in possession, it is crucial that you understand everything that your position entails. Not only can this simplify the bankruptcy process, but it may help to maximize your business’s ability to survive following the bankruptcy.

This information should be used for educational purposes and should not be taken as legal advice. 

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