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

A debtor-in-possession financing statement is a document that is filed with the bankruptcy court when a business owner or individual filing for Chapter 11 bankruptcy still wants to borrow money from a lender while in the bankruptcy process. This document sets forth the terms and conditions of the loan, such as who is lending and who is borrowing the money, the interest rate, the time period over which the loan is to be paid, and importantly, the priority that the lender has over other lenders and creditors. In other words, the priority that the lender is given in terms of repayment means that the lender’s debt will be paid off before any other creditors that the debtor may have. This is important in a Chapter 11 filing, as the debtor has the opportunity to restructure their finances and come out of bankruptcy with a plan for repayment. This document also gives the lender the security that their debt will be repaid in a timely manner and in accordance with the terms of the loan as set forth in the debtor-in-possession financing statement.

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

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