Carbon Health Technologies, Inc. and 27 affiliated entities filed for Chapter 11 bankruptcy protection on February 2, 2026, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. The healthcare technology and management services organization operates approximately 93 urgent care and primary care clinics across eight states, serving over 800,000 patients annually with 480 healthcare providers and 1,400 employees. The debtors face liquidity constraints arising from a cost structure built for a larger enterprise in a different capital markets environment and are pursuing a dual-track restructuring featuring both a debt-for-equity reorganization plan and a concurrent asset sale process.
Company Background and Business Operations
Carbon Health Technologies operates as a management services organization providing non-clinical, administrative, and operational support to medical service providers across its clinic network. The company was founded in San Francisco in 2015, initially as a software platform and mobile application development company for medical records, telehealth, doctor-patient messaging, and scheduling.
In 2017, the debtors launched their first urgent care clinics in the San Francisco Bay Area. Through a series of strategic partnerships and geographic expansion, the company grew to operate approximately 93 clinics across Texas, Washington, California, Colorado, Kansas, Missouri, New Jersey, and Massachusetts. The current headquarters is located in Sunnyvale, California.
The company's operational model centers on its proprietary software platform called CarbyOS, which enhances patient engagement and drives operating efficiency. The platform enables the debtors to provide a flexible range of services tailored to patient needs across locations while maintaining consistent operations. The system assists physicians and care teams by simplifying scheduling, billing, and day-to-day operations.
Carbon Health Technologies maintains a corporate structure with approximately 41 active subsidiaries and affiliates, of which 28 are debtors in the Chapter 11 cases. The company has three foreign subsidiaries that are not debtors: Carbon Health Colombia S.A.S. in Colombia, Carbon Health Turkiye in Turkey, and Avante Limited in the United Arab Emirates.
The physician-owned entities that provide medical services are each solely owned by the company's Chief Medical Officer, in compliance with laws regulating the corporate practice of medicine. These physician-owned entities are parties to Management Services Agreements with Carbon Health Technologies under which the company provides practice management services in exchange for compensation.
Financial Condition and Path to Bankruptcy
The debtors recorded revenues of approximately $166 million in 2024 and approximately $154 million for the trailing twelve months ended November 30, 2025. The revenue reduction is primarily attributable to deliberate sales of clinics and wind-down of certain programs undertaken to reduce debt and right-size the business, rather than a decline in underlying demand.
During 2020 and 2021, the debtors expanded operations in response to increased demand for accessible healthcare services, including COVID-related testing and vaccinations. This expansion included investments in technology, clinical footprint, and personnel to support efficient delivery of care.
Beginning in 2022, as pandemic-related demand subsided and capital markets tightened significantly for healthcare growth companies, the debtors experienced material decline in revenue and access to external financing. In response, the company implemented cost-reduction initiatives including workforce reductions, clinic closures, and discontinuation of certain service lines. Despite these measures, the debtors continued to face liquidity constraints as the scale of the business no longer aligned with available capital.
Ongoing operating losses and limited financing alternatives ultimately led to the liquidity challenge that precipitated the bankruptcy filing. The debtors face a cost structure built to support a larger enterprise in a materially different capital markets environment.
Judgment Levy Dispute
On January 2, 2026, a Writ of Garnishment was issued to Silicon Valley Bank by the Circuit Court in the Fifteenth Judicial Circuit in Palm Beach County, Florida, in favor of RPT Realty, L.P., a former landlord of certain debtors. Silicon Valley Bank received the writ on January 5, 2026, and froze approximately $1.9 million in a bank account maintained by Carbon Health Technologies.
On January 12, 2026, the prepetition secured lender's agent delivered a letter to Silicon Valley Bank challenging the judgment levy on the basis that the frozen funds constitute prior existing collateral of the secured lenders. The debtors also assert that the judgment levy was executed within the 90 days prior to the petition date and constitutes an avoidable preferential transfer. The debtors indicated they are prepared to bring an adversary proceeding to avoid the judgment levy.
The debtors dispute that the judgment creditor has any valid or enforceable lien against the frozen funds. The secured lenders have asserted that their liens are senior to the judgment creditor as proceeds of the lenders' collateral.
Capital Structure
Secured Term Debt
The debtors and Future Solution Investments LLC, as agent for prepetition lenders, are parties to a Loan and Security Agreement dated November 14, 2025, under which lenders originally advanced an initial term loan in the original principal amount of $10 million.
On November 24, 2025, the parties amended the agreement to provide for an additional term loan in the original principal amount of approximately $61.9 million, the proceeds of which were used to pay off the company's secured credit facility with its prior lender. On January 20, 2026, the parties further amended the agreement to provide for an additional term loan in the original committed principal amount of $6 million.
As of the petition date, the debtors were indebted to the prepetition secured parties for an aggregate principal amount of not less than $77 million, plus accrued and unpaid interest, fees, costs, expenses, charges, and other obligations under the loan documents. The obligations are secured by first priority liens on substantially all of Carbon Health Technologies' assets, including goods, accounts, equipment, inventory, investment property, general intangibles including intellectual property, cash, deposit accounts, and proceeds from intellectual property. The obligations are also secured by certain accounts, cash, deposit accounts, books and records, and proceeds of certain physician-owned debtor entities.
Clinic Level Secured Debt
Certain debtor entities borrowed from three separate lenders for developing and opening clinics:
John Muir Health provided a delayed draw term loan under a Credit and Guaranty Agreement dated November 5, 2021, with borrowing capacity of $20 million. Outstanding principal obligations total approximately $3.9 million as of the petition date. The loan is secured by assets of two affiliated entities that do not themselves operate any clinics.
Stanford Health Care provided a delayed draw term loan under a Credit and Guaranty Agreement dated May 23, 2022, with borrowing capacity of $25 million. Outstanding principal obligations total approximately $3.8 million as of the petition date. The loan is similarly secured by assets of two affiliated entities that do not operate clinics.
Prime Healthcare Services, Inc. provided financing under a Credit Agreement dated October 20, 2021, as amended May 29, 2024, agreeing to provide $1.25 million for each healthcare clinic developed by certain borrower entities. Outstanding principal obligations total approximately $7.6 million as of the petition date. The borrower entities under this facility do not operate clinics, and the lender's security interest is not perfected as no UCC-1 statement was recorded.
Unsecured Debt
As of the petition date, the debtors estimate they owe approximately $36 million in unsecured obligations, primarily to trade creditors arising in the ordinary course of business operations and including approximately $7 million of unsecured promissory notes.
Dual-Track Restructuring Strategy
Following months of negotiations, the debtors and the prepetition secured lender's agent reached agreement on terms of a dual-track comprehensive restructuring process. The process allows the debtors to pursue in parallel both confirmation of a Chapter 11 plan premised on a debt-for-equity exchange and a postpetition marketing and sale process for assets, in whole or in part, in one or more sale transactions.
Shortly after the petition date, the debtors plan to file a combined plan of reorganization and disclosure statement. The plan provides for an internal reorganization where secured lenders exchange their secured debt, or a portion thereof, for equity in the reorganized debtors in the event there is not an acceptable sale transaction for substantially all of the enterprise.
The debtors filed a motion seeking court approval of bid procedures for the sale of assets. The proposed procedures provide flexibility to pursue either a sale of the entire enterprise or one or more partial sales on a timeline consistent with milestones agreed upon with the secured lender's agent, along with the option to proceed with the plan process in the event the sale process does not yield actionable results.
The dual-track approach builds upon efforts undertaken as part of a months-long prepetition marketing process that ended in November 2025. Prior to the petition date, the debtors' investment banker commenced a new comprehensive marketing effort for the assets.
First Day Relief
On the petition date, the debtors filed motions seeking various forms of relief intended to stabilize business operations and facilitate efficient administration of the Chapter 11 cases. Key among the first day motions is a request for approval of debtor-in-possession financing from the prepetition secured lenders and authorization to use cash collateral. Without this authority, the debtors would not have sufficient liquidity to continue operations.
Additional first day motions seek authorization to maintain existing bank accounts and cash management systems, pay prepetition employee wages and benefits, maintain patient programs, obtain adequate assurance of utility services, continue insurance coverage, and extend time to file schedules and statements of financial affairs.
The debtors also filed a motion seeking authorization to reject certain unexpired leases and executory contracts and to abandon personal property located at leased premises. The debtors sought approval to redact certain personally identifiable information from creditor matrices and to establish procedures for notifying creditors of the bankruptcy filing.
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