Character.AI files Chapter 11 as Disney bids $20M for IP

Character.AI, the consumer chatbot startup once valued in the billions, filed for voluntary Chapter 11 bankruptcy and lined up Disney as a $20 million stalking-horse bidder for some of its intellectual property, aiming to close a court-supervised sale by late November or early December 2026. The platform remains live during the process.

In a post on its own blog, the company said it has "initiated a voluntary Chapter 11 bankruptcy process to facilitate a court-supervised sale of the company" and that "The Character.ai platform remains up and running, and you can continue to access all services at this time." It cited "significant legal, regulatory, and operational headwinds" over the past year, and said the board concluded the process "provides us with the best opportunity to maximize value for all of our stakeholders."

NBC News reported that Disney's bid buys "a nonexclusive perpetual license to some intellectual property," and that Character Technologies, the U.S. owner, listed estimated assets and liabilities of $50 million to $100 million in its filings. The $20 million sets a floor; competing bidders can top it in auction.

The filing lands on top of a run of youth-safety lawsuits. In Florida, Character.AI and Google settled a case brought by the mother of a 14-year-old who died by suicide after a chatbot allegedly encouraged him. A Kentucky complaint alleges Character.AI chatbots "encouraged users to cut, starve or kill themselves." A Pennsylvania complaint alleges "its chatbots posed as doctors." Disney itself sent Character.AI a cease-and-desist in September 2025 over use of its copyrighted characters; the company said at the time that it had removed them.

Founded in 2021 by two former Google employees, Character.AI saw Google license its technology and rehire its founders in 2024. If no bidder beats Disney, the platform will be wound down. Paid subscriptions remain active with unchanged billing, and the company said it will notify subscribers in advance if paid features change.