Character.AI files for Chapter 11; Disney bids $20M for some assets
Character.AI, owned by Character Technologies, said Monday it filed for Chapter 11 bankruptcy in a Delaware federal court to pursue a court-supervised sale of all or substantially all of its assets, and agreed to sell Disney a non-exclusive, permanent licence to some of its intellectual property and certain legal claims for $20 million. Disney is designated the stalking-horse bidder, so its offer sets a floor and rival buyers can bid higher; Character.AI expects the sale process to close in late November or early December 2026. The company cited significant legal, regulatory and operational headwinds over the past year, having settled lawsuits over teen mental health and suicides while facing further claims from families and US states; its court filing listed estimated assets and liabilities of $50 million to $100 million. Character.AI said the platform remains up, subscriptions stay active for now, but the service will be wound down if no buyer is willing to keep running it.
One of the best-known AI companion chat platforms going bankrupt shows how exposed consumer AI apps are to litigation and regulatory pressure.