What is a “debtor-in-possession loan” in a Chapter 11 bankruptcy?

A debtor-in-possession loan is a type of loan available to individuals or businesses who file for Chapter 11 bankruptcy in California. With a debtor-in-possession loan, a lender provides funds to the debtor so they can continue to operate their business while they are in bankruptcy. The debtor is allowed to use these funds to pay operational expenses and to reorganize the business’s finances. A debtor-in-possession loan is different from other types of loans because the lender has more protections than other creditors. These protections can include higher priority in repayment, which means the lender is repaid before other creditors. Another benefit of a debtor-in-possession loan is that the lender may have the approval of the court to make changes to the terms of the loan if needed. This can also include having the court approve additional loans. The debtor-in-possession loan is a valuable tool for individuals and businesses in California who are restructuring their finances and reorganizing their business under Chapter 11 bankruptcy. It helps keep the business running while the debtor works to reorganize the finances and pay off debt.

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What is a “debtor-in-possession loan” in a Chapter 11 bankruptcy?

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