Character.ai on the bankruptcy table, Disney next in line with $20 million

Character.ai has landed in court. Character Technologies, which runs the chat site, filed a voluntary Chapter 11 petition (the reorganization chapter of the US bankruptcy code) with the Delaware Bankruptcy Court on 12 October 2026. Nor is it the first AI chat company to go down this road. The case got the number 26-11603 and went to Judge Brendan Linehan Shannon. The company wants to sell itself under the court's supervision.

Now for the offer. Disney has become the "stalking horse" (the first bidder, the one who sets the floor price for the auction) with $20 million. Mind you, that money doesn't buy the company. What Disney gets for it is a non-exclusive, perpetual license to certain intellectual property rights. If a higher bid comes in, it may lose out at the auction. The hearing on the bidding procedures is on 30 October, and the creditors' meeting is on 19 November. The sale is expected to close at the end of November or early in December.

According to the court records, the company's assets and its debts both fall somewhere between 50 and 100 million dollars. CEO Colin Adams points to legal, regulatory and operational difficulties as the reason. Behind all this are lawsuits over the safety of teenagers, plus cases brought by the states of Kentucky and Pennsylvania.

For now the platform is still up, and paid subscriptions continue at the same price. If no bid comes along that keeps the service running, the site will shut down. If you're a subscriber, download your data now. The company's data export guide is already online.