An introduction to chapter 11 of the Bankruptcy Code

Abstract

Chapter 11 may be a useful tool to reorganize, or gradually liquidate, a large business. The debtor (and the debtor’s management) take on the role of trustee, avoiding the disruption that often comes in chapter 7 from replacement of management with a randomly selected trustee. The court may appoint a trustee in a chapter 11 case, but more often prior bad acts will be the subject of an investigation by an independent examiner. Instead, the debtor acts as the trustee, with the title of “debtor in possession” or “DIP.” The DIP is the debtor – in possession of its own bankruptcy estate, and with duties that largely track those of a chapter 7 trustee.