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Debtor in Possession

Definition - What does Debtor in Possession mean?

A debtor in possession refers to a specific type of debtor who has filed for, and has been granted bankruptcy, and are in possession of the assets. Furthermore, an entity that continues to operate after it files for bankruptcy is considers a debtor in possession.

Justipedia explains Debtor in Possession

When a person or entity first files for bankruptcy, that person or entity then becomes a debtor in possession. The reason for this is because there has not been enough time for the person or entity to assign its debts to its various creditors. However, there are certain situations that allow for the person or entity in debt to hold on to all of its assets. For example, if an entity has filed for bankruptcy where the entity will continue to do business, then the entity will be allowed to keep all assets necessary in order to keep the business running.

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