Selling company data in bankruptcy – who can sell it and what the court requires

Not long ago, a company's email server and Slack workspace were simply switched off when the company failed. Now they can be some of the most valuable assets left. AI labs pay for real workplace communication, and in 2026 that demand reached bankruptcy court. In the Spirit Airlines case, internal emails and Teams messages were auctioned to the highest bidder. This guide explains who controls company data in each type of US wind-down, what the Bankruptcy Code requires for a sale and where privacy rules come in.

This guide describes how things generally work today. It is not legal advice. Every case and every deal is different – bankruptcy is court-supervised, and what applies is assessed case by case. That's where we come in – we guide you through it, bring in the right experts when a question calls for it, and work to find a deal that fits your data.

Why data has become a bankruptcy asset

In August 2026, Google won the auction for Spirit Airlines' internal business data with a $10 million bid, ahead of Mercor's $7.5 million. According to court filings, the archive includes about 100 million emails and 500 million Microsoft Teams messages and collaboration records. Passenger profiles and loyalty data were excluded.

Smaller companies are doing the same. MIT Technology Review reported that the wind-down firm SimpleClosure has handled more than 150 data and code deals through its Asset Hub, and that 47% of its deals now include a code or data sale.

The lesson: when a company goes into bankruptcy, its data is generally treated as property of the estate – and it can have value for creditors.

Who controls the data in each type of wind-down

Who can decide on a sale or license depends on the route the company takes.

Chapter 7 liquidation

A Chapter 7 trustee is appointed to collect and sell the estate's assets for the benefit of creditors. Founders, officers and the board generally no longer control company property, including its data. If you believe the data has value, the trustee is the person who needs to know – quickly, before systems are shut down.

Chapter 11 reorganization or sale

In Chapter 11, the company usually stays in control as debtor-in-possession. It can run the business, but selling assets outside the ordinary course of business still requires notice to creditors and court approval. Spirit's data sale is going through this process.

Assignment for the benefit of creditors (ABC)

Many startups wind down through an ABC under state law instead of bankruptcy. The company assigns its assets to an assignee, who sells them and distributes the proceeds. The assignee typically controls the data and decides on a sale, within the rules of the state.

Dissolution outside insolvency

If the company is solvent and dissolves voluntarily, the board usually stays in control and can decide on a license, subject to the usual privacy, contract and platform rules. This is often the most flexible situation – see our guide on closing your company.

What Section 363 requires

Under 11 U.S.C. §363(b)(1), the trustee or debtor-in-possession may sell property of the estate outside the ordinary course of business only after notice and a hearing. In practice, that means creditors are told about the proposed sale, can object, and the court decides.

The privacy rule for personally identifiable information

Section 363(b)(1) adds a special rule. If the company had a privacy policy prohibiting the transfer of personally identifiable information to unaffiliated parties, and that policy was in effect when the case began, the data may only be sold if:

1. the sale is consistent with the policy, or
2. a consumer privacy ombudsman has been appointed, and after notice and a hearing the court approves the sale, after considering the circumstances and finding that no showing was made that it would violate applicable non-bankruptcy law.

The Bankruptcy Code defines personally identifiable information narrowly. It covers names, home addresses, email addresses, phone numbers, Social Security numbers and credit card numbers that individuals gave the company to get products or services for personal, family or household purposes. In practice, it is mainly about customer data.

The consumer privacy ombudsman

When the privacy rule applies, the court orders the US trustee to appoint a disinterested consumer privacy ombudsman under §332, at least 7 days before the hearing. The ombudsman gives the court information about the debtor's privacy policy, the potential privacy losses or gains for consumers and alternatives that could reduce the harm.

In the Spirit case, the ombudsman filed a report in October 2026 recommending approval as long as customer personal information was excluded, Law360 reported. The approval hearing, first set for October 14, 2026, was moved to November 6, 2026 after the congressional letter, IBTimes reported. As of late October 2026, the court had not ruled.

Employee data: not covered by §363, but not unprotected

Because the Bankruptcy Code's definition focuses on consumers, employee emails and chats usually fall outside the §363 privacy rule. That does not make them free to sell:

• State privacy laws such as the CCPA cover employee data in California.
• Objections can still be raised. In the Spirit case, the flight attendants' union objected, and more than 120 members of Congress asked Google and Spirit to pause the transfer of employee-related data.
• The court decides whether the sale is approved, and it helps when the seller can show how employee data is selected and de-identified.

Read more in our guides on selling employee emails and chats and anonymized vs de-identified data.

Timing: before the archives disappear

The biggest practical risk in a bankruptcy is that the data is gone before anyone considers it. When payments stop, cloud subscriptions are cancelled and archives are deleted. To keep the option open:

1. Inventory early. List which systems hold data – email, Slack or Teams, ticketing, CRM, code – and when the subscriptions expire.
2. Tell the decision-maker. Raise it with the trustee, assignee or debtor's counsel as soon as possible.
3. Preserve, don't copy. Keep the data where it is. Founders or employees taking private copies can create legal problems.
4. Check the privacy policy. What did it promise customers about transfers? That largely determines whether §363's privacy rule comes into play.
5. Get a valuation. A realistic view of what the data could be worth helps the trustee decide whether a sale process is worth running.

How we work with companies in wind-down

You – or the trustee, assignee or counsel – describe the data in a short form without sending files, and we get back to you within 48 hours on business days. We assess rights, personal information and platform terms, and give a realistic view of value. Nothing is shared until there is a non-disclosure agreement and an approved offer, and any deal is subject to whatever approvals the process requires. More on closing a company and selling data.

Summary

In bankruptcy, company data is generally property of the estate. In Chapter 7 the trustee controls it, in Chapter 11 the debtor-in-possession usually sells it with court approval, and in an ABC the assignee decides. Section 363 requires notice and a hearing, and if the privacy policy prohibited transfers of customer information, a consumer privacy ombudsman is typically appointed. Employee data generally falls outside that rule, but not necessarily outside privacy law or public scrutiny. Above all, raise the question early, before the archives are deleted.