Debtor In Possession - DIP

AAA

DEFINITION of 'Debtor In Possession - DIP'

An individual or corporation that has filed for Chapter 11 bankruptcy protection and remains in control of property that a creditor has a lien against, or retains the power to operate a business. A debtor who files a Chapter 11 bankruptcy case becomes the debtor in possession (DIP). The DIP continues to run the business and has the powers and obligation of a trustee to operate in the best interest of any creditors. A DIP can operate in the ordinary course of business, but is required to seek court approval for any actions that fall outside of the scope of regular business activities. The DIP must also keep precise financial records and file appropriate tax returns.

INVESTOPEDIA EXPLAINS 'Debtor In Possession - DIP'

After filing for Chapter 11 bankruptcy, new bank accounts are opened that name the debtor in possession on the account. A debtor in possession can be terminated and the court will appoint a trustee in the event that assets are improperly managed or the debtor in possession is not following court orders. The United States Trustee's office maintains guidelines that specify the duties of a debtor in possession.

RELATED TERMS
  1. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  2. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  3. Debtor-In-Possession Financing ...

    Financing arranged by a company while under the Chapter 11 bankruptcy ...
  4. Incipient Default

    When a borrower appears to be heading toward defaulting on its ...
  5. Priming Loan

    A form of debtor-in-possession, or DIP financing, whereby the ...
  6. Debtor

    A company or individual who owes money. If the debt is in the ...
RELATED FAQS
  1. What are the differences between chapter 7 and chapter 11 bankruptcy?

    Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past ... Read Full Answer >>
  2. What are some alternatives a company can attempt prior to resorting to liquidation?

    Some alternatives a company's owners can attempt prior to resorting to liquidation are selling the company, raising money ... Read Full Answer >>
  3. Under what circumstances might a company decide to liquidate?

    There are many reasons a company may decide to liquidate. A smaller company may decide to liquidate if one of the main owners ... Read Full Answer >>
  4. What happens to the shares of a company that has been liquidated?

    The fate of a liquidating company’s shares depends on the type of liquidation the company is undergoing. The most common ... Read Full Answer >>
  5. What is the difference between compulsory and voluntary liquidation?

    Liquidation is the process where a firm's assets and liabilities are terminated, realized and subsequently distributed. In ... Read Full Answer >>
  6. What can cause a merger or acquisition deal to fail?

    When two large companies announce plans to merge, or when the larger of the two acquires the smaller entity, the surviving ... Read Full Answer >>
Related Articles
  1. Home & Auto

    From Booms To Bailouts: The Banking Crisis Of The 1980s

    The economic environment of the late 1970s and early 1980s created the perfect storm for a banking crisis.
  2. Credit & Loans

    How To Survive A Bankruptcy Filing

    Learn how to make filing for bankruptcy less painful so you can successfully rebuild your financial life.
  3. Options & Futures

    Bankruptcy Filing Changes That Could Affect You

    When the economy is down, more people file for bankruptcy. Make sure you know about the changes that have been made to this process.
  4. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  5. Investing

    Will Shale Oil Companies Go Bankrupt?

    An overview of shale oil companies and the threats they face in the aftermath of the decline in crude oil prices.
  6. Personal Finance

    7 Bankrupt Companies That Came Back

    Bankruptcy is often the end of a company – until it isn't.
  7. Economics

    Understanding Subordinated Debt

    A loan or security that ranks below other loans or securities with regard to claims on assets or earnings.
  8. Stock Analysis

    Will American Airlines Fall Back To Earth In 2015?

    The airline industry enjoys blockbuster profits, and American Airlines Group has been a key beneficiary of the favorable trends that have lifted stocks.
  9. Investing

    What is Equity Financing?

    Companies that are short on cash may need financing to pay for short-term needs or long-term capital expenditures.
  10. Stock Analysis

    What’s The Best Airline Stock In the Industry?

    With many airlines forced to seek bankruptcy protection, Southwest Airlines stands out as having consistently remained profitable throughout its history.

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!