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What Is A Debtor In Possession?


Is your business planning to file for Chapter 11 bankruptcy in South Florida? If so, if you have conducted initial research into the Chapter 11 bankruptcy process, you have likely come across the term “debtor in possession.” This term is not relevant in all types of bankruptcy cases, but it is particularly important to understand what this term means for debtors in Chapter 11 bankruptcy cases. Both businesses and individuals that file for bankruptcy need to understand the requirements for a debtor in possession, and how this status can impact the reorganization bankruptcy and, in particular for businesses, the ability to obtain credit to continue running the business during the bankruptcy case. What do you need to know? Our West Palm Beach Chapter 11 bankruptcy lawyers can provide you with additional information, and we can begin working with you today on your Chapter 11 case.

Defining a Debtor in Possession in Florida 

Before we explain what is required of a debtor in possession, it is critical to understand to whom or to what this term applies in a bankruptcy case in South Florida. In short, a debtor in possession is the debtor that files for Chapter 11 bankruptcy. Yet unlike debtors in personal reorganization cases under Chapter 13, or debtors in Chapter 7 liquidation cases, debtors in Chapter 11 cases — debtors in possession — have additional and significant duties.

Duties of a Debtor in Possession in a Chapter 11 Bankruptcy Case

 What are the duties of a debtor in possession in a Chapter 11 case? According to the U.S. Courts, “Section 1107 of the Bankruptcy Code places the debtor in possession in the position of a fiduciary, with the rights and powers of a . . . trustee, and it requires the debtor to perform all but the investigative functions and duties of a trustee.” In other words, as a debtor in possession in a Chapter 11 case, a debtor (a business or individual) essentially takes on the role of bankruptcy trustee.

What particular tasks or duties are involved in being a debtor in possession? The U.S. Courts lists the following specific duties as examples that Chapter 11 debtors should anticipate taking on when they file for bankruptcy:

  • Accounting for property;
  • Examining and objecting to claims;
  • Filing information reports (like monthly operating reports);
  • Employing attorneys, accountant, appraisers, and other parties with the approval of the bankruptcy court;
  • Filing tax returns; and
  • Conducting final accounting.

In terms of monitoring the debtor’s compliance in a Chapter 11 bankruptcy case, that is a duty that remains left to the U.S. trustee. Debtors in possession may be required to perform additional duties based on the specific facts of the case, and it is important to gain a clear understanding of the contours of your case by working with a bankruptcy lawyer.

Contact a West Palm Beach Bankruptcy Lawyer 

Any business or individual who has questions about filing for Chapter 11 bankruptcy or requirements in a reorganization bankruptcy should get in touch with an attorney who can help. One of our experienced West Palm Beach Chapter 11 bankruptcy attorneys at Kelley Kaplan & Eller is here to assess your circumstances and to provide you with additional information and assistance.



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