Debtor-in-Possession (DIP)

Category: legal

A person or corporation that has filed for Chapter 11 bankruptcy but remains in control of their property and operations.

The DIP operates the business day-to-day, holding the assets in trust for the creditors. Because there is no appointed trustee running the show, the DIP has specialized fiduciary duties and must obtain court permission for any actions outside the "ordinary course of business," like selling a division or taking on new debt.

Common Examples

• As the Debtor-in-Possession, the CEO had to petition the court before authorizing the payment of annual executive bonuses.
• The creditors’ committee closely monitors the Debtor-in-Possession to ensure corporate assets aren't being wasted during the restructuring.