Debtor in Possession (DIP) financing describes the funding
obtained by an insolvent debtor while that debtor is restructuring
its business. The term DIP financing originated from the American
practice in Chapter 11 proceedings under the U.S. Bankruptcy
Code.
During a Chapter 11 proceeding, the debtor is referred to as a
debtor in possession or DIP, since the debtor is continuing
"in possession" of the business while the business is
being restructured. During this time, a DIP is empowered to
continue to operate the business and may use, sell, or lease
property to the extent that doing so is in the ordinary course of
the debtor's business.
DIP financing may be used to pay professionals (the debtor's
legal and financial advisors, the Monitor and its legal advisors
and sometimes stakeholder's legal and financial advisors), to
provide operating financing to permit the continuation of the
debtor's business during the restructuring process, sometimes
to finance necessary
