Martha has a small tailoring business that employs five tailors and three shop assistants. Because business is going well, Martha decides to expand. She purchases twice as much cloth, thread and buttons and borrows money to expand her store space. Initially business continues to increase, but then there is a sharp drop-off and Martha cannot pay back her debts. She declares bankruptcy and files a petition for Chapter 11 with the court. The court allows Martha to continue to operate her business. Martha is a:

a. trustee.

b. receiver.

c. liquidated owner.

d. debtor in possession.

Answer: The position of the Martha will be a debtor in possession (option d).

Explanation:

Chapter 11 is specified as the United States Bankruptcy Code. The petitioner can be involved in the business of the partnership, sole proprietorship or in any corporate level of business. It is the kind of legal security given by the Federal Court Authorities to the individuals who want to save themselves from the issue of paying the debt to the creditors at the time of uncertainty conditions prevailing in the business.

In this case, Martha filed the petition of chapter 11 code against paying her debt. Here the court only accepts the request with the guarantee of security of her properties which again serves as the right of a creditor to recover the debt. This is how the Martha's situation is explained as the debtor in possession.