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 Maine, 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 a claim to. The DIP is allowed to operate the business with the goal of reorganization, rather than liquidation. This process is overseen by the bankruptcy court to ensure that the DIP's actions are in the best interest of the creditors and the business continues to comply with legal obligations such as maintaining records, insuring assets, and filing tax returns. The DIP may obtain financing under court supervision to keep the business afloat during this period. However, the DIP must open new bank accounts to reflect their status and must seek court approval for significant business decisions. The court closely monitors the DIP's financial dealings to protect the interests of creditors and employees. The regulations governing DIPs are primarily federal, as Chapter 11 is part of the federal Bankruptcy Code, but state laws may also impact certain aspects of the bankruptcy proceedings and the treatment of creditors' claims.