Character.ai files for Chapter 11 to sell itself and will shut the platform down if no buyer keeps it running
Character Technologies, which runs the Character.ai chatbot platform, filed for bankruptcy on October 12, 2026, to sell the company. Disney opened the bidding with 20 million dollars for a license to some of its intellectual property. The service keeps running during the sale, and the company says it will be wound down if no buyer takes it on.
Character Technologies, the company behind the Character.ai platform for chatting and role-playing with AI characters, filed a voluntary Chapter 11 case on October 12, 2026. The goal is a court-supervised sale of all or substantially all of its assets. The platform is still running, but the company says it will be wound down if the sale does not produce a buyer that keeps it going.
How the sale works
The case is before the US Bankruptcy Court for the District of Delaware. Chapter 11 of the US Bankruptcy Code lets a company keep operating under court supervision while it restructures or sells its assets. Character.ai expects the sale to close in late November or early December 2026.
Before filing, the company signed an agreement with Disney Worldwide Services. Disney is the stalking horse bidder: its offer sets the floor, and other buyers can make higher or better offers under section 363 of the Bankruptcy Code. Disney is offering 20 million dollars for a non-exclusive, perpetual license to certain Character.ai intellectual property and certain legal claims.
Disney will also provide transition services through former Character.ai employees it has hired. According to the company's release, those services are meant to help it operate the platform safely for a limited period and to support the sale.
What it means for users
The company says the platform is up and all services remain available for now. Paid subscriptions stay active, and billing is unchanged for the time being. If the service changes in a way that affects paid features, Character.ai says it intends to notify subscribers in advance.
User chats and data remain covered by the existing privacy policy, and the company says its data protection practices have not changed. Users can export their data or delete their account in the app or on the Character.ai website.
CEO Colin Adams attributes the filing to significant legal, regulatory, and operational headwinds over the past year. He says the board concluded that a court-supervised sale offers the best chance to maximize value for all stakeholders.
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