CHAPTER 11 DEBTOR IN POSSESSION:

Bankruptcy Debtor in Possession:

Unless a trustee is appointed in the case (see below), the debtor remains in possession of the property of the estate and continues to operate the business unless the court orders otherwise. The debtor in possession has all of the rights, powers, and duties of a trustee, except the right to compensation and the duty to investigate the debtor.

a. Business judgment rule: In operating the business, the debtor in possession has the authority to make reasonable business judgments concerning the ordinary affairs of the debtor, and generally the bankruptcy court will not disturb these decisions absent "allegations of, and a real potential for, abuse by corporate insiders.

b. Employment of professionals: Any attorney, lawyer, accountant, or other professional employed by the bankruptcy debtor in possession must be a disinterested person and cannot hold or represent any interest that is adverse to the estate. However, a professional person is not disqualified for employment solely because she was employed by or represented the debtor prior to the commencement of the bankruptcy case.

Appointment of Trustee: Since the bankruptcy debtor in possession usually is considered to be the most appropriate person to operate the particular business, it is viewed as "the exception, rather than the rule" for a trustee to be appointed in a Chapter I I case. In fact, there is a presumption that the debtor should be allowed to remain in possession.

However, after the filing of the petition and prior, to confirmation of a plan, a party in interest or the United Slates trustee may request the appointment of a trustee, either for cause or in the interest of creditors, equity security holders, and the estate. The bankruptcy court generally requires evidence showing more than simple mismanagement. Some courts have used a cost-benefit analysis, taking into account the administrative expenses that are likely to ensue from the appointment of a trustee.

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