A debtor in possession is an entity that has filed for Chapter 11 bankruptcy protection, and which continues to run the business. A debtor in possession has the same powers as a trustee, and so can make decisions in the ordinary course of business without permission from the court. The court can appoint a trustee to replace the debtor in possession; this is done when the court believes that the appointment of a trustee will be in the best interests of the creditors. There is no debtor in possession for a Chapter 7 filing – only an appointed trustee.
The debtor in possession has 120 days from the bankruptcy petition date to propose a plan to the court, as well as another 60 days to convince creditors and shareholders to accept the plan. The court is allowed to extend these deadlines by as much as 14 months, thereby giving the debtor in possession a great deal of control over the process.