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

A debtor-in-possession loan (“DIP loan”) is a type of loan a person or business can take out if they are filing for Chapter 11 bankruptcy in Washington. This type of loan is specifically tailored to help businesses stay afloat while they are undergoing reorganization. The main goal is to keep the business operational and avoid liquidation. The loan is often secured by some of the business’s assets and the debtor agrees to give up control of those assets. These assets help to ensure that the debt is paid back and the lender is protected from risk. The DIP loan is overseen by the bankruptcy court and is designed to give the business an opportunity to make a recovery by allowing it to continue running while it goes through the bankruptcy process. This loan also gives the debtor a chance to reorganize its debt to an amount that is more manageable. The goal of this reorganization is to give the debtor a chance to become profitable again and be able to pay creditors. The DIP loan should also help the business to generate cash flow, allowing it to pay its debts and eventually emerge from the bankruptcy process.

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

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