Character.AI: Chapter 11 Bankruptcy and Planned Sale of the Company

What Changed

On 12 October 2026 Character Technologies, Inc., the company behind Character.AI, began a voluntary Chapter 11 case in the US Bankruptcy Court for the District of Delaware so that it can sell all or substantially all of its assets in a court-supervised process. The company says the platform remains up and running and that, if the sale does not produce a bid that allows it to continue, the platform will be wound down. The company's press release says that, before filing, it agreed with Disney Worldwide Services that Disney would be the opening ('stalking horse') bidder, for $20 million, for a non-exclusive perpetual licence of certain company intellectual property and claims, together with transition services provided by former company employees Disney has hired; the formal stalking horse agreement filed with the court is dated 13 October, and other bidders can beat the offer. On the company's description, this is a licence of certain intellectual property and claims, not a purchase of the platform itself. On 4 November 2026 the court approved the bidding procedures: bids are due by 24 November, an auction is scheduled for 1 December and a sale hearing for 3 and 4 December 2026, so the outcome is not expected before early December. Character.AI says subscriptions and billing are unchanged for now, that its privacy and security practices are unchanged, and that users can export their data or delete their account through the app or website. We have not found a company statement about what a buyer would do with existing accounts, chats or teen safety settings. It has been reported that, on 14 October, attorneys general from a large group of US states told the court that any sale of the app or its users' data should meet conditions, including protections for children and limits on how users' data is used.

What to Review

• •If your child uses Character.AI, ask what they have shared in their chats and whether they would like to export or delete that history. Character.AI says users can do either through the app or the website.
• •Character.AI says it intends to notify subscribers in advance if the service changes in a way that affects paid features, so watch for notices in the app and on its blog over the coming weeks.

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