Filing Chapter 11 Bankruptcy As “Debtor In Possession”

For self-employed and small business owners considering Chapter 11 bankruptcy, filing bankruptcy creates anxiety about their ability to continue operating their business and earning an income.  Fortunately, the bankruptcy laws allow business owners to file bankruptcy as a “debtor in possession.”  What that means is that the debtor is allowed to file Chapter 11 bankruptcy and continue to operate their business, while receive the benefits of “automatic stay” protection.  Debtors in possession are protected from creditor actions such as lawsuits and asset seizures.  Even if a creditor obtained a judgment before the bankruptcy filing, they would not be allowed to collect on a “debtor in possession.” Another benefit of filing bankruptcy as a debtor in possession is that the bankruptcy law allows the debtor to take out more loans which will take precedence over all other creditors.

If a business files Chapter 11 bankruptcy as a debtor in possession he/she is bound by certain rules.  For example, the debtor is not allowed to sell assets without the approval of the creditors who have an interest in those assets.  The debtor is also prohibited from using encumbered assets as collateral to obtain new loans without the approval of the creditors.

To find out more about filing Chapter 11 bankruptcy, contact a Dallas-Fort Worth bankruptcy attorney.

By | 2017-12-13T01:10:59+00:00 September 26th, 2009|Bankruptcy, Chapter 11 Bankruptcy, Debt Consolidation|Comments Off on Filing Chapter 11 Bankruptcy As “Debtor In Possession”