Debtor in Possession Account: 6 Requirements the US Trustee Enforces

A chapter 11 case changes who owns the checking account before it changes anything else about the business. The company that filed on Tuesday still answers the phones and still ships orders on Wednesday, but the money it collects now belongs to an estate, and the estate has a supervisor in the United States Trustee, whose field office will ask for bank paperwork long before it asks about a plan.

The requirements for the account come less from the Code than from the trustee's operating guidelines, which each region publishes for itself, resting on the depository rule in section 345 and on the debtor's duties as a fiduciary. The version quoted here is Region 21's Operating Guidelines and Reporting Requirements, dated February 2026. Other regions write their own, courts can authorize departures, and Region 21 states that any request to vary or waive a requirement must go in writing to the field office. The six requirements below are the ones its text makes mandatory or close to it.

1. Every Prepetition Account Closes, and the Closing Is Proved

The guidelines require the debtor to close its prepetition bank accounts and to document the closing for the trustee. Before the initial debtor interview, the list of materials the debtor must produce includes proof that every prepetition account has been closed, "including copies of the final periodic statement and cancelled checks for each account," and, separately, each periodic statement for the twelve months before the petition for every financial account held by or for the debtor, with cancelled checks or a check register.

A year of statements is a long document. It is also the first place the trustee's office will see the daily debits of a merchant cash advance, the transfers to an owner's personal account, and the payment to a relative's company three weeks before the filing, which is why the request for statements and the request for closure arrive on the same list. The closing ends the old account's life. The statements explain it.

2. New Accounts Open in the Estate's Name, and the Trustee Sees Them

The companion obligation is to open new debtor in possession accounts and send the trustee proof that they exist. That proof sits on the same pre-interview list as the closures.

This is the shortest requirement to state, and the easiest to let slide in a week when payroll is also due.

3. The Bank Must Be One the Estate Is Allowed to Use

Section 345(b) is written for trustees, and through section 1107 it reaches every debtor in possession. Except for deposits insured or guaranteed by the United States, the statute requires the entity holding estate money to post a bond in favor of the United States, secured by a corporate surety the United States Trustee has approved, or to deposit qualifying government securities, "unless the court for cause orders otherwise." Region 21 restates the rule plainly: absent court authorization, accounts may be kept only at depositories that agree to bond or collateralize every deposit that federal insurance does not cover.

Owners tend to treat this as a formality until they discover that their bank of fifteen years has not signed the agreement, and that the estate's money cannot stay where it has always been. Section 345 does not care about the relationship. It cares about what happens to deposits above the insured limit if the bank fails, and the answer it demands is a bond or a pledge rather than an assurance from a branch manager who has known the family since the store opened.

Whether the bank has agreed is a question for counsel before the petition, not after the first deposit, and a business with a line of credit or a sweep arrangement at a bank that is not on the list has a second problem, because the setoff rights and automatic sweeps built into those arrangements were written for a solvent borrower and did not anticipate that the borrower would become, overnight, a fiduciary for its own creditors. The bank may still be a creditor. It may hold the estate's deposits only on the statute's terms, or on the court's.

But the court can make exceptions. Section 345(b) ends on that clause for a reason, and a debtor with a sound argument for keeping a particular account can make it by motion.

4. Every Dollar of Revenue Lands in One Operating Account First

Region 21 directs that "all business revenues must be deposited into the operating account," with money for the other accounts transferred out as needed. The debtor should also keep a separate general account for bills incurred in administering the case. Petty cash is not assumed; a request to use or keep a petty cash account goes to the trustee in writing. A sole proprietor, whose personal and business finances were never legally distinct, should open a separate debtor in possession account just for personal living expenses.

The single point of entry works the way a hospital's central supply room works: nothing reaches a ward without first being logged at one door, so that when a count comes up short, there is exactly one place to start looking. A business that lets card processors settle into three different accounts has three doors.

5. Tax Money Is Held in Trust, and May Need an Account of Its Own

The guidelines say the debtor should, where appropriate, open a separate tax trust account to escrow postpetition taxes as they are incurred, payroll and sales or excise taxes among them, and that the debtor may be required to open separate accounts for payroll and for payments to secured creditors. Bankruptcy Rule 2015(a)(3)(B) points the same way from another direction: a debtor that pays employees must file a statement of the tax deductions required and "the place where these funds are deposited."

Region 21 describes unpaid postpetition taxes as administrative claims and calls the failure to remit them a breach of fiduciary duty and grounds for conversion, dismissal, or a trustee. You withhold it on Friday, you owe it the moment you withhold it. The separate account exists so that the money never has the chance to look like working capital.

6. The Monthly Report Asks About the Accounts in Plain Words

Enforcement of the first five requirements happens mostly on paper the owner signs. A small business or Subchapter V debtor reports each month on Official Form 425C, under a declaration made under penalty of perjury. Question 5 asks whether all receipts were deposited into debtor in possession accounts. Question 10 asks whether any account other than those is open. Question 17 asks whether bills from before the filing were paid, and question 18 whether checks written before the filing were allowed to clear. A "no" to the first requires an explanation labeled Exhibit A; a "yes" to the others requires Exhibit B.

Other chapter 11 debtors, those outside the small business and Subchapter V categories, report on the United States Trustee's own monthly form, and Region 21 requires non-individual debtors to attach the statements issued by each financial institution for the month. The guidelines also tell the debtor to close its books as of the filing date and open new postpetition books, keeping the old ones available for review.

The questions are not hard to answer truthfully. They are difficult to answer truthfully twice, in different ways, which is what a debtor with an unreported account ends up doing, and the second answer is the one that becomes an exhibit to a motion.

Region 21 lists what failure to comply may bring: a motion to dismiss, a motion to convert to chapter 7, a motion to appoint a trustee or examiner, or a motion for sanctions. The guidelines state the list without adjectives. The accounts, in the end, are the part of the case a trustee can read without asking anyone's permission.

Before the Estate Owns the Account

Delancey Street works on business debt before a filing and is not a law firm. It offers a free, confidential review of funder contracts, bank activity, and UCC filings to see whether a negotiated resolution is realistic, and independently licensed attorneys handle any legal matter. An owner already operating as a debtor in possession has a lawyer's work in front of it, and should rely on that lawyer for every question above. The review serves the owner who still has a choice about which bank, and whose rules, will hold the operating account next month.