What distinguishes business bankruptcies from other bankruptcies in New York? And what exactly is a “debtor in possession”?
At the simplest level, business bankruptcies involve a business rather than just an individual who is filing for bankruptcy. Business bankruptcies also often involve a corporate entity, whether that’s a corporation, a limited liability company or even a non-profit corporation.
Business bankruptcies can be Chapter 7 liquidation or Chapter 11 reorganization. Either way, it makes sense to have an experienced business bankruptcy lawyer in your corner as business bankruptcies tend to be more complex.
The debtor in possession concept is one of those factors that can make a business bankruptcy more complicated. What is a “debtor in possession”? The debtor in possession (aka “DIP”) is a concept that occurs only in a Chapter 11 bankruptcy. It simply means that when a company files for bankruptcy, the company owner (or management) continues to run the company and make day-to-day management decisions throughout the course of the Chapter 11 case.
It was not always this way. In the past, when a company filed for bankruptcy, a trustee was automatically appointed to run the company. However, the inclusion of the debtor in possession idea reflects the belief that a company is more likely to succeed in its reorganization if it’s run by the person or people who are most familiar with it. In reality, this is not always the case. But under U.S. bankruptcy law we start off with a presumption that this is the case.
If you have questions about business bankruptcies in Brooklyn or elsewhere in New York, please feel free to contact experienced Brooklyn business bankruptcy lawyer Bruce Weiner for a free initial consultation.
