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Chapter 11 Debtors in Possession

Upon the filing of a voluntary petition for relief under Chapter 11 or, in an involuntary case, the entry of an order for such relief, the debtor automatically assumes an additional identity as the "debtor in possession." The term refers to a debtor that keeps possession and control of its assets while undergoing a reorganization under Chapter 11, without the appointment of a case trustee.


Debtor Remains Debtor in Possession until Reorganization Plan Confirmed


A debtor remains a debtor in possession until the plan of reorganization is confirmed, the case is dismissed or converted to Chapter 7 or a Chapter 11 trustee is appointed. The appointment or election of a trustee occurs only in a small number of cases. Generally, the debtor, as debtor in possession, operates the business and performs many of the functions that a trustee performs in cases under other chapters.

Debtor in Possession in Position of a Fiduciary


The debtor in possession is placed in the position of a fiduciary, with the rights and powers of a Chapter 11 trustee, and is required to perform all but the investigative functions and duties of a trustee. The debtor's powers and duties include accounting for property, examining and objecting to claims, and filing informational reports as required by the court and the United States Trustee, such as monthly operating reports.


Debtor in Possession has many Powers and Duties of a Trustee


The debtor in possession also has many of the other powers and duties of a trustee, including the right, with the court's approval, to employ attorneys, accountants, appraisers, auctioneers, or other professional persons to assist the debtor during its bankruptcy case. Other responsibilities include filing tax returns and filing such reports as are necessary or as the court orders after confirmation, such as a final accounting. The United States Trustee is responsible for monitoring the debtor in possession's compliance with the reporting requirements.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.

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