A debtor in possession (DIP) is a person or corporation that has filed for Chapter 11 bankruptcy protection but still holds property to which creditors have a legal claim—based on a lien or other security interest. A DIP may continue to do business using those assets but is required to seek court approval for any use outside of regular business activities. The DIP must also maintain financial records, insure the property, and file appropriate tax returns.

One advantage to DIP status is for the debtor to be able to continue to run the business (reorganizing it) rather than liquidating it or selling it for less than its true value—which benefits both the debtor and the creditors. A DIP may also be able to secure DIP financing to remain solvent until the business can be sold.

But after filing for Chapter 11 bankruptcy, the debtor must close its bank accounts and open new accounts that indicate its status as a debtor in possession on the account. And significant decisions regarding the operation of the business must be approved by the bankruptcy court. A DIP must act in the best interests of its creditors and employees. And A DIP’s spending and financing practices are carefully regulated by the bankruptcy court.

In Alaska, as in other states, a Debtor in Possession (DIP) refers to a person or corporation that has filed for Chapter 11 bankruptcy but retains control of property that creditors have an interest in. The DIP is allowed to operate the business with the goal of reorganizing and eventually paying back creditors. This arrangement is often preferable to liquidation, as it can preserve the value of the business and potentially benefit both the debtor and the creditors. The DIP must seek court approval for transactions outside of normal business operations, maintain accurate financial records, insure assets, and file tax returns. Opening new bank accounts to reflect the DIP status is required, and significant business decisions must be approved by the bankruptcy court. The DIP is also subject to oversight to ensure that the interests of creditors and employees are being served and that spending and financing are conducted in a manner that complies with court regulations. Federal law, specifically the U.S. Bankruptcy Code, governs Chapter 11 proceedings, while state law may influence certain aspects of the bankruptcy process and the treatment of creditors' rights.