Legal Dictionary & Glossary

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DEBTOR IN POSSESSION

a person or corporation who has filed a bankruptcy petition but remains in possession of Property upon which a creditor has a lien or similar security interest.

Section 1107 of the Bankruptcy Code places the debtor in possession in the position of a fiduciary, with the rights and powers of a chapter 11 Trustee, and it requires the debtor to perform of all but the investigative functions and duties of a Trustee. These duties, set forth in the Bankruptcy Code and Federal Rules of Bankruptcy Procedure, include accounting for Property, examining and objecting to claims, and filing informational reports as required by the court and the U.S. Trustee or bankruptcy administrator (discussed below), such as monthly operating reports. 11 U.S.C. §§ 1106, 1107; Fed. R. Bankr. P. 2015(a). 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 reports which are either necessary or ordered by the court after confirmation, such as a final accounting. The U.S. Trustee is responsible for monitoring the compliance of the debtor in possession with the reporting requirements. See also: bankruptcy.

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