What is debtor-in-possession (DIP) financing?

Debtor-in-possession (DIP) financing is a mechanism used in Chapter 11 bankruptcy cases that allow a debtor to raise capital while operating the business. When a business files for Chapter 11 bankruptcy protection, DIP financing allows the company to obtain lending from a third-party lender. The funds are used to maintain the operations of the business, pay creditors, and reorganize the business. In the state of Utah, the debt-in-possession financing is subject to the Bankruptcy Code and the court’s approval. This means that the company must submit a plan to the court which outlines how the money raised from the loan will be used. The court must determine that the plan is in the best interests of all creditors and the debtor itself. Once approved, the debtor will be able to use the funds to pay its operational costs, employees, and creditors. In addition to the court’s approval, DIP financing also requires the approval of all creditors. This means that all creditors must agree to the terms of the loan and sign off on it. If they do not agree, then the loan cannot go through and the debtor will not be able to get the capital it needs. Debtor-in-possession financing is a tool used to help debtors in Chapter 11 bankruptcy cases. It allows the debtor to obtain capital to continue operating the business, pay employees, and reorganize the business. In Utah, the debt-in-possession financing is subject to the Bankruptcy Code and the court’s approval. It also requires the approval of all creditors before the loan can be approved.

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What is debtor-in-possession (DIP) financing?

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