Document Type

Research Memorandum

Publication Date




When a debtor attempts to reorganize under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”), the debtor typically remains “in possession” and retains all the rights of the trustee, including the right to administer the bankruptcy estate “as a fiduciary for the estate’s creditors” in a chapter 11 bankruptcy case.

Importantly, a debtor-in-possession and a trustee are empowered to employ third parties to carry out their duties. Section 327 of the Bankruptcy Code deems these individuals “professional persons.” A professional person may be compensated upon submission of a fee application to the court. The “scant” jurisprudence on the extent of permissible payments to professional persons has been the subject of discussion among the bankruptcy community.



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