Business bankruptcy: Chapter 7, Chapter 11 and your data

Can a business file bankruptcy?

Before you file, check what the company's records are worth. AI developers now pay for the operational records of closing and bankrupt companies, such as email and chat archives, tickets, documents and code (public deals). Once the case is filed, the estate becomes the temporary legal owner of the company's property, and that value goes to creditors before owners. A free valuation takes six questions about the business and no files.

Yes. Individuals, partnerships, corporations and other business entities can file Chapter 7 (U.S. Courts). Chapter 11 is typically used to reorganize a business, whether a corporation, sole proprietorship or partnership, and small businesses can choose Subchapter V, a streamlined version of it (U.S. Courts). Sole proprietorships may also be eligible for Chapter 13, the repayment plan for individuals with regular income (U.S. Courts).

The owners' exposure depends on the structure. A corporation exists separately from its stockholders, so its Chapter 11 case does not put their personal assets at risk beyond the value of their stock. A sole proprietorship has no separate identity, so its case includes the owner's business and personal assets. A partner's personal assets may in some cases be used to pay the partnership's creditors (U.S. Courts).

The company files in the bankruptcy court for the area of its domicile, residence or principal place of business, with schedules of assets and liabilities, income and expenditures, executory contracts and unexpired leases, and a statement of financial affairs.

Source: U.S. Courts: Chapter 11 bankruptcy basics

Chapter 7 vs Chapter 11 vs Subchapter V for a business

The three routes differ on who runs the company, how it ends and how fast it moves.

• Sources: U.S. Courts, Chapter 7; U.S. Courts, Chapter 11; U.S. Trustee Program; fee schedule; 11 U.S.C. 1189; 11 U.S.C. 1191; 11 U.S.C. 1192.

Source: U.S. Courts: Chapter 11 bankruptcy basics

Chapter 7 for a business: what the trustee does

When a Chapter 7 petition is filed, the U.S. trustee appoints an impartial case trustee to administer the case and liquidate the nonexempt assets (U.S. Courts). The trustee must collect and reduce to money the property of the estate, close it as quickly as is compatible with the best interests of parties in interest, and investigate the debtor's financial affairs (11 U.S.C. 704).

The trustee sells property that is free of liens, or that is worth more than the liens and exemptions on it, and can set aside preferential payments made to creditors in the 90 days before the petition. If the debtor is a business, the court may let the trustee run it for a limited time when that benefits creditors and the liquidation. Proceeds are paid in six classes under section 726, each in full before the next gets anything; the debtor is paid only if every other class is paid in full.

A corporation or partnership receives no discharge in Chapter 7 (11 U.S.C. 727(a)(1)).

• Between 21 and 40 days after filing, the trustee holds a meeting of creditors, where the debtor answers questions under oath.
• In an asset case, unsecured creditors file claims within 90 days after the first date set for that meeting; government units have 180 days from filing.
• The debtor gives the trustee its most recent tax return and any returns filed during the case.

Source: U.S. Courts: Chapter 7 bankruptcy basics

Chapter 11 for a business: reorganize, sell or both

On filing, the company becomes debtor in possession: it keeps control of its assets, runs the business and performs most of a trustee's duties, such as accounting for property, objecting to claims and filing monthly operating reports (U.S. Courts; 11 U.S.C. 1107). The U.S. trustee monitors those reports. A creditors' committee, usually the holders of the seven largest unsecured claims, consults on the case, investigates the business and helps shape the plan.

The debtor has 120 days to file a plan exclusively, and the court can extend that to no more than 18 months. Creditors whose rights are changed vote after the court approves a disclosure statement. Confirmation discharges a company from most debts that arose before it, but a liquidation plan discharges only an individual, not a company. Professional fees are paid only if the court authorizes them, while the ordinary expenses of the business continue to be paid.

Subchapter V, created in 2019, is for businesses with combined debts of $3,424,000 or less, at least half from business activities. Only the debtor can file a plan, within 90 days. A trustee is appointed in every case to help reach a consensual plan, a creditors' committee is appointed only for cause, and the debtor pays no U.S. Trustee quarterly fees (U.S. Trustee Program; 11 U.S.C. 1189).

Source: U.S. Courts: Chapter 11 bankruptcy basics

Selling assets in bankruptcy: how a 363 sale works

Whoever runs the estate sells its assets: the trustee in Chapter 7, or the debtor in possession in Chapter 11. A debtor in possession may sell in the ordinary course of business without prior approval, but a sale outside the ordinary course needs the court's permission (U.S. Courts). Section 363 sets the rules (11 U.S.C. 363):

• Notice and a hearing: the trustee may use, sell or lease estate property outside the ordinary course of business only after notice and a hearing.
• Free and clear: property can be sold free of another party's interest, such as a lien, in five cases, including when that party consents or when the price is greater than the total of all liens on the property.
• Protected buyers: if an approval is reversed on appeal, a sale to a good-faith buyer stands unless it was stayed pending the appeal.
• No collusion: the trustee can avoid a sale whose price was controlled by an agreement among potential bidders.
• Auctions: in the airline case below, the debtors ran a virtual auction under a court-approved bidding procedures order and named a successful bidder and an alternate (Chapter 11 Cases).
• Outside bankruptcy the buyer gets less: in an ABC, a secured lender must be paid in full or agree to release its lien (Mayer Brown).

Source: 11 U.S.C. § 363: use, sale or lease of property (Cornell LII)

Company data and records as bankruptcy assets

Filing creates an estate that becomes the temporary legal owner of the debtor's property (U.S. Courts). Data the company owns can be sold from it like other property, with one statutory limit for consumer information.

If the company gave customers a policy prohibiting the transfer of their personally identifiable information to unaffiliated companies, and that policy was in effect on the filing date, the trustee may sell or lease that information only if the sale is consistent with the policy, or after a consumer privacy ombudsman is appointed and the court approves it after notice and a hearing, finding no showing that it would violate applicable nonbankruptcy law (11 U.S.C. 363(b)(1)).

• What counts: a name, home address, email address, home phone number, Social Security number or credit card number that an individual gave the company to obtain a product or service primarily for personal, family or household purposes, plus details such as a birth date when linked to them (11 U.S.C. 101(41A)).
• The ombudsman: the court has the U.S. trustee appoint a disinterested person no later than 7 days before the hearing, who may present the privacy policy, the potential privacy losses or gains for consumers, and alternatives that would reduce privacy losses (11 U.S.C. 332).
• Employee data: in the airline case, flight attendant and pilot unions objected, and amici said that to their knowledge no employer had previously tried to sell its employees' data as an asset in bankruptcy (Chapter 11 Cases).
• Vendor data and contracts: in the same case, some vendors asked the court to enforce confidentiality agreements, and one argued that data it had shared through the airline's systems was not estate property and supplied samples to help exclude it (Chapter 11 Cases).

Source: 11 U.S.C. § 363: use, sale or lease of property (Cornell LII)

The Spirit Airlines data sale: a bankrupt company's records at auction

The clearest public example is the bankruptcy of Spirit Airlines' parent (In re Spirit Aviation Holdings, Inc., No. 25-11897, Bankr. S.D.N.Y.). Its de-identified business data was offered for sale as an asset of its own, alongside sales of aircraft and flight simulators (Chapter 11 Cases).

• The records were marketed as a separate asset, at a price set by competitive bidding.
• Customer data was what the privacy review narrowed; employee data was what the unions contested.
• The deals tracker records the outcome as reported.

Source: Chapter 11 Cases: Spirit data sale hearing moves to November (Oct 2026)

Bankruptcy vs ABC vs dissolution: who sells the company's data

An insolvent company has three main exits. For a data sale they differ most on who signs and what the buyer receives. The ABC guide compares speed, cost and court involvement in more detail.

• Sources: U.S. Courts; 11 U.S.C. 363; Mayer Brown; Fairfield and Woods; RCW 23B.14.050.

Source: American College of Bankruptcy: alternatives to bankruptcy compared (Mar 2026)

Records duties in a business bankruptcy

Bankruptcy adds duties on top of the usual retention periods. After filing, the records go to whoever runs the estate.

• For payroll, employee and benefit-plan retention periods, see the US closing checklist.

Source: 11 U.S.C. § 521: debtor's duties (Cornell LII)

Before you delete company systems, check what the records are worth

Cancelling email, chat, ticketing or code hosting ahead of a filing deletes records the trustee is entitled to and that buyers may pay for. Keep the systems running, or take full exports, until counsel and whoever will run the estate agree a records plan.

Then check the value: see what the company's records are worth from six questions about the business, with no files. A figure helps the board compare Chapter 7, Chapter 11 and an ABC, and gives the trustee or debtor in possession a starting point.

• Describe what you hold at company level: systems, years covered, headcount and approximate volume. The data inventory template gives the columns.
• Find every privacy policy and customer agreement that was in effect, with its dates.
• Do not move records or other assets to insiders before filing. Transfers to insiders such as directors or officers made up to a year before filing may be undone, and so, subject to defenses, may transfers made in the 90 days before (U.S. Courts).
• Before any sample leaves the company, read how to de-identify company data.

Source: U.S. Courts: Chapter 11 bankruptcy basics

Business bankruptcy checklist for owners and advisers

• Choose the route with insolvency counsel: Chapter 7 to liquidate, Chapter 11 to reorganize or sell under court protection, Subchapter V if total debts are $3,424,000 or less, or an assignment for the benefit of creditors for a state-law liquidation.
• Budget for the court fees in the comparison table above and for professional fees, which in Chapter 11 need court approval.
• Prepare the schedules: assets and liabilities, income and expenditures, executory contracts and unexpired leases, and the statement of financial affairs. List data and software systems among the assets.
• Preserve records and the privacy policies in force; suspend automatic deletion settings.
• Avoid preferential payments and insider transfers in the run-up to filing.
• If a data sale is likely, plan for de-identification, leave customer systems out where the privacy policy requires, and expect employee and vendor objections.
• Check personal exposure: a corporation's case does not put stockholders' personal assets at risk beyond their stock, but a sole proprietor's case includes personal assets. Review any personal guarantees with counsel.

Next step

Before filing, list the company's systems and the records in them, and keep them intact. No export is needed to find out whether they have value. For the rest of the closing, see the US closing checklist and selling company data after closing.

Origin Data Partners is independent and is not affiliated with any AI data buyer. We help owners compare buyers and find the best fit for their records. See what your data is worth.

Origin Data Partners is not a law firm. This guide summarizes public sources so you can frame questions for your own counsel. It is not legal advice.