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Character.AI has filed for Chapter 11 bankruptcy to sell its assets. Disney has agreed to pay $20 million as the first bidder, and the platform keeps running during the sale.
Character Technologies Inc., the company behind Character.AI, announced the filing on October 12, 2026. The case is in the U.S. Bankruptcy Court for the District of Delaware. The company cites "significant legal, regulatory, and operational headwinds".
The Disney offer
Disney Worldwide Services is the stalking horse bidder: its offer sets the floor, and others can bid more.
| Item | Disney's offer |
|---|---|
| Price | $20 million |
| What Disney gets | A non-exclusive, perpetual license to certain Character.AI intellectual property, and certain company claims |
| Extra | Transition services from former Character.AI employees Disney has hired, to help run the platform for a limited time |
| Can others outbid? | Yes, the deal is open to "higher or better offers" under section 363 of the Bankruptcy Code |
What happens next
- Timeline. The company expects the sale to complete and close in late November or early December 2026.
- The platform. Character.AI keeps operating "with minimal disruptions to service" during the sale.
- If no buyer keeps it. If the sale does not lead to a buyer that continues the platform, "the platform will be wound down".
CEO Colin Adams said the board chose a court-supervised sale as "the best opportunity to maximize value for all stakeholders."
Court filings are on the case website run by the claims agent, Stretto.
Sources
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