Debtor in Possession Law and Legal Definition

A debtor in possession is a person or corporation who continues its business operations and remains in possession of its property during a bankruptcy proceeding or a reorganization without the appointment of a trustee. A debtor in possession files for protection from creditors under Chapter 11 of the Bankruptcy Code. A debtor in possession assumes a fiduciary responsibility to creditors and owes them the highest duty of care and loyalty. A debtor in possession may keep a personal vehicle which has depreciated in value since the time of purchase, and which the debtor needs in order to continue employment to pay off his/her debts.