Character.AI Files for Bankruptcy With Disney’s $20 Million Bid

Character Technologies , the company behind Character.AI, filed for Chapter 11 bankruptcy in Delaware on Oct. 12 to pursue a court-supervised asset sale. Disney’s $20 million agreement covers a nonexclusive, perpetual license to certain intellectual property and company claims, subject to higher or better offers.

Disney Sets an Opening Bid for Technology Rights

Disney Worldwide Services agreed to serve as the proposed stalking-horse bidder, setting an opening offer for competing bids. The agreement includes transition services from former Character.AI employees now working at Disney.

Those services are intended to support operations during the sale process. The agreement does not establish that Disney has acquired the entire business or committed to maintaining its consumer platform indefinitely.

Character.AI Keeps Services and Subscriptions Active

Character.AI said services remain available and paid subscriptions remain active. Billing is unchanged, and the company intends to notify subscribers before changes affecting paid features.

Privacy and security practices also remain unchanged, according to its announcement. Users can still delete accounts or export their data.

The announcement links to a support page offering an AI-guided conversation and mental-health educational resources from nonprofit Koko. These resources address uncertainty about the service’s future rather than an announced closure.

Character.AI Targets a Sale by Early December

The company expects the sale process to conclude in late November or early December 2026. It has requested court approval for bidding procedures, while Disney’s proposed transaction remains open to competing offers.

Character.AI attributed the filing to legal, regulatory and operational difficulties. It warned that the platform will wind down if no actionable bid supports continued operations.