Debtor in Possession
Corporate Credit Analysis glossary · Distressed Debt & Restructuring
Definition
A debtor in Chapter 11 that continues to operate its business under court supervision. The DIP retains management control and the ability to negotiate a plan, distinct from a court-appointed trustee in Chapter 7.
Debtor in Possession in plain English
Imagine a struggling business files for bankruptcy protection, but instead of handing the keys to an outsider, the same managers keep running the company while a judge watches over their shoulder. That company is the "debtor in possession" (DIP) — it still "possesses" and operates its own business. This happens in Chapter 11 (the reorganize-and-survive kind of bankruptcy), and the whole point is to keep the business alive and its value intact while it works out a plan to pay creditors. It's the opposite of Chapter 7, where a court-appointed trustee takes over to sell everything off.
Practice Debtor in Possession
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