- Internal data can be a valuable asset in bankruptcy: Alphabet paid $10 million for Spirit Airlines' emails, Teams chats and records in August 2026.
- Section 363(b)(1) restricts selling personally identifiable information if the debtor's privacy policy prohibited transfers, unless a court approves after a consumer privacy ombudsman reviews it.
- Customer data and payment card data are usually excluded; workplace communications and code carry most of the AI value.
- Buyers bid on how many useful training tasks the data yields, so documentation drives price.
Why data matters in a bankruptcy estate
AI developers now buy workplace archives to train agents on how real work is done. In August 2026 Alphabet bought Spirit Airlines' data for $10 million at auction: about 100 million emails, 500 million Microsoft Teams messages and other internal records, with the customer list and card data excluded (TravelPulse). MIT Technology Review reported that Mercor also bid (MIT Technology Review).
For an estate, that can mean recoveries from an asset no one used to value.
The privacy rule in section 363
If the debtor's privacy policy, in effect when the case began, prohibited transferring personally identifiable information to unaffiliated parties, the trustee may not sell or lease that information unless either the sale is consistent with the policy, or the court approves it after appointing a consumer privacy ombudsman, giving notice and holding a hearing, and finding no showing that the sale would violate applicable non-bankruptcy law (11 U.S.C. 363). The ombudsman reports to the court on the privacy issues and alternatives (11 U.S.C. 332).
Workplace archives contain personal information about employees, customers and contacts, so plan for this rule early.
What usually sells and what is excluded
| Usually licensable after review | Usually excluded |
|---|---|
| Internal email and chat, de-identified | Customer lists and contact data |
| Source code and issue history | Payment card and bank data |
| Internal documents and wikis | HR, medical and disciplinary files |
| Operational records and logs | Privileged legal communications |
A process that holds up in court
- Inventory without copying. Systems, volumes, date ranges and record types.
- Check the privacy policy in force at the petition date, and employee notices.
- Define exclusions and a de-identification protocol, ideally with an independent check.
- Market to qualified buyers under NDA with a manifest and a small redacted sample.
- Seek court approval with the ombudsman's input where required.
- Restrict use in the sale order and license: no re-identification, no contact with individuals, deletion on breach.
The criticisms to anticipate
Reporting on these sales has highlighted that proceeds go to creditors rather than employees whose messages are sold, that scrubbing may miss personal details, and that Spirit's flight attendants' union objected on privacy grounds (MIT Technology Review). Strong exclusions and transparent terms reduce objections and the risk to the sale.
Read selling data from a closed company and email archives.
Read next
Questions
Can a bankruptcy trustee sell employee emails to an AI company?
It has happened, as in Spirit Airlines' case. Personal information triggers section 363(b)(1) if the privacy policy prohibited transfers, and may need a consumer privacy ombudsman and court approval. Get specialist advice.
Who receives the money from a data sale in bankruptcy?
The estate, for distribution to creditors under the usual priority rules.
Do you work with trustees?
Yes. We can help inventory, document and market data assets, introduce qualified buyers and support the sale process alongside the estate's counsel.
Sources
- TravelPulse: Google buys Spirit Airlines' data for $10 million (August 2026)
- MIT Technology Review: AI labs are buying data from dead startups to train models (October 2026)
- Cornell Law School LII: 11 U.S. Code section 363, use, sale, or lease of property
- Cornell Law School LII: 11 U.S. Code section 332, consumer privacy ombudsman