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 Ohio, as in other states, a Debtor in Possession (DIP) refers to a company or individual who 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 reorganization rather than liquidation, which can be more beneficial for both the debtor and the creditors. The DIP is subject to strict oversight by the bankruptcy court and must obtain court approval for transactions outside of normal business operations. This includes securing new financing, known as DIP financing, which can help the business stay afloat during the reorganization process. The DIP is required to open new bank accounts to reflect their status, maintain accurate financial records, insure assets, and file tax returns. All significant business decisions must be approved by the court, and the DIP must prioritize the interests of creditors and employees. The court closely monitors the DIP's spending and financing to ensure compliance with bankruptcy regulations.