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Chapter 11 bankruptcy and the debtor in possession

At William H. Oliver, Jr. & Associates in New Jersey, our legal team understands that the language of Chapter 11 bankruptcy is unique. For example, you may wonder what it means to be a debtor in possession.

If you are the debtor who is filing, you will probably be filling this role, so it is important to understand it.

The role of the debtor in possession

According to the United States Courts, as the debtor in possession, you have the role of fiduciary, and you must perform most of the duties that would normally belong to a bankruptcy trustee. These include the following:

  • Filing court-mandated informational reports, such as the company's monthly operating reports
  • Paying employee withholding taxes and other taxes and filing tax returns
  • Accounting for property
  • Examining claims 
  • Employing professionals such as attorneys, appraisers and accountants to assist you 
  • Establishing new bank accounts

You may also use, sell or lease the company's property in the ordinary course of doing business without seeking the court's approval unless you have been told by the court that you may not do so. If you are seeking to do so under circumstances outside of the ordinary course of business, you must receive the court's permission.

The U.S. trustee retains investigative duties and provides oversight as you continue to operate the business and take care of the responsibilities listed above.

The role of the creditors' committee

The trustee may appoint a creditors' committee that consists of unsecured creditors, usually limited to the seven with the largest claims against you. These creditors perform a number of functions:

  • Administrate the case
  • Investigate your conduct as you operate the business
  • Participate in the formulating of the repayment plan

The committee may hire a team of professionals to help carry out these duties. More information about running your business during a Chapter 11 bankruptcy is available on our webpage.

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