DIP budgets and wind-down carve-outs: how to fund records preservation

The short answer: three line items and an end date

A debtor that wants to keep a later records license possible needs money for three things that usually fall between budgets: the key systems kept alive or moved to an archive tier, an administrator who can still run exports, and storage for those exports. Put them in the 13-week DIP budget as a named records preservation line, carry them into the wind-down budget in the sale order, and give each one an end date tied to a decision, such as SourceX qualification or a signed license.

The gap is structural. DIP budgets fund operations and the sale process. Wind-down budgets and professional fee carve-outs fund the estate after closing: taxes, payroll obligations, professionals, and plan or dismissal costs. Records sit in neither. The buyer takes the systems it wants, the rest are cancelled at closing, and the people who could run exports leave with the last payroll. For the same problem outside bankruptcy, see the general guide to a wind-down budget that keeps key systems alive.

Where do records costs belong in the financing documents?

Terms differ by case, so read the interim and final DIP orders, the credit agreement and the sale order. As a map:

Prerequisites

• A system list with monthly cost, renewal or paid-through dates, rough data volume and the people who hold admin rights.
• A first view of rights: whether the company created the records, and what customer contracts and privacy policies promised.
• An early read on fit. SourceX works with US companies that reached 50+ full-time employees at peak (contractors excluded) and have several years of operating history, rights to license the records and an authorized signatory, which in a case means the debtor in possession or its successor acting under the court's orders. A first pass with the company fit checker is quick and non-binding, and who qualifies sets out the full baseline.
• A sense of where the lenders and the committee stand. Lenders whose collateral includes the company's intangibles have a direct interest; see private credit lenders taking the keys.

Step by step: building the records line

1. Sort every system into one of four treatments. Keep live, downgrade to an archive or read-only tier, export then cancel, or cancel. Only the first three cost money, and the third costs it once.
2. Price the line by week in the 13-week budget. Label it records preservation, not IT, so it is not cut in the first variance squeeze. Show subscriptions, storage and admin hours separately.
3. Keep the administrator. Fund a stay bonus or contractor hours for the person who can run full exports. Retention payments in a bankruptcy case may face limits, especially for insiders, so counsel should structure them; ask counsel what the Bankruptcy Code and local practice allow.
4. Carry the line into the wind-down budget. Many sale processes fix a wind-down amount at closing. Make records preservation a named use of that amount, decide who controls the systems after closing and, if the buyer takes them, secure export access through the transition services agreement.
5. Add a rights and privacy review line. FTC staff have warned that adopting more permissive data practices, such as using data for AI training, through a quiet retroactive change to terms of service or a privacy policy may be unfair or deceptive (FTC staff post). Budget for counsel to scope the license around existing promises, not to rewrite them. Consumer data can also draw a consumer privacy ombudsman: in 23andMe's 2025 bankruptcy, the ombudsman recommended that customers' genetic or personal data not be transferred without renewed opt-in consent, as The Record reported. If the records include consumer data, budget for that review or exclude the data.
6. Set release triggers. The line runs until SourceX qualification fails, the license closes and delivery is complete, or a fixed outside date passes. Unused amounts go back as the order directs.
7. Report against it weekly. Show the lenders and the committee what the line preserved; a visible, bounded line is far easier to extend than a vague one.

What committee advisers should ask during DIP negotiations

Committee financial advisers review the DIP budget and usually push on the wind-down amount. Add these questions to the list:

• Does the budget include a named line for records preservation, with weeks and end dates?
• Which systems does the buyer take, and does the estate keep export access to them?
• Are books and records excluded assets, or does the estate keep a license-back for its own use and for a records license?
• Will any software contract be rejected before its data has been exported?
• Who holds admin credentials after the last payroll?
• Who will have authority to sign a license after a plan, dismissal or conversion?

A records license is one of the few assets that can still be monetized after the main sale, so these questions protect value for unsecured creditors as well as for lenders.

Common mistakes

Illustrative example: a records line in a 13-week budget

Illustrative only; the company is fictional and amounts are left out because they vary widely. A distribution company that peaked at 210 full-time employees runs a chapter 11 sale of its operating business. The buyer wants the ERP and the customer list but not the legacy helpdesk, the email archive or the old engineering tracker. The CRO adds this line:

In this illustration the line is modest beside the sale process costs, which is the point: it buys a decision instead of a deletion. The guide to buying a company out of bankruptcy shows the same split from the purchaser's side.

How the referral works for CROs and committee advisers

Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company; the reward becomes payable only after the buyer pays and SourceX receives its fee, and no reward is guaranteed. The reward is a share of SourceX's fee, so it never reduces what the estate receives.

Most CROs and committee advisers are retained by the estate or a committee. Outside compensation connected to an estate transaction can raise disclosure and conflict questions, so ask counsel before registering and disclose the relationship in writing. Either way, the partner only makes the introduction: the debtor works with SourceX on the inventory, redaction rules, contracting and delivery.

This is general information, not legal, tax or financial advice. Confirm with your own counsel, tax adviser or professional body before acting.

Next step

Before the DIP budget is final, add the records line. Then register as a partner and introduce the debtor, so the line has a SourceX milestone to end on.