Character.AI filed for Chapter 11 in Delaware
Character Technologies, the company behind Character.AI, filed a voluntary Chapter 11 petition on October 12, 2026. Character.AI is a service for chatting with AI characters that also offers Books, Series and Comics, and its parent company was founded in 2021.
The filing is meant to let the company sell all or most of its assets while a judge oversees the process. The case is pending in the U.S. Bankruptcy Court for the District of Delaware as case 26-11603, assigned to Judge Brendan Linehan Shannon. Court documents are posted on a public case site run by Stretto, the claims and noticing agent Character.AI hired.
"Character Technologies, Inc. d/b/a Character.AI filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. The Debtor's bankruptcy case was assigned Case No. 26-11603 and is pending before the Honorable Brendan Linehan Shannon in the United States Bankruptcy Court for the District of Delaware" (case overview) — from the Stretto case siteView official source →
Chapter 11 keeps the company running during the sale
Under Chapter 11, a company keeps operating while a court supervises its restructuring or sale, so the filing does not switch the app off. Character.AI says it will keep the platform online while it looks for buyers.
Alongside the petition, the company asked the judge to let it keep paying employees, honoring promises to users and paying vendors for work after the filing date. Those requests are routine "first day motions," and approval lets day-to-day operations continue until a deal closes.
The sale should close in late November or early December
Character.AI expects the court-supervised sale to wrap up by the end of November, or possibly early December 2026. Its board picked this route after reviewing other options and concluded that a supervised sale offered the best chance to maximize value for stakeholders.
"We currently expect that the court-supervised sale process will be complete by the end of November or perhaps early December 2026." (FAQ 2)／"After a comprehensive review of our available alternatives, our board determined that this court-supervised sale process provides us with the best opportunity to maximize value for all of our stakeholders." (body) — from the Character.AI blogView official source →
The app and subscriptions keep working for now
What stays the same and what is still undecided as of October 14, 2026
| Item | Current status |
|---|---|
| The service | Every feature still available |
| Paid subscription | Still active |
| Subscription billing | Unchanged for now |
| Changes to paid features | Notice given in advance |
| Chats and account data | Covered by the Privacy Policy |
| After the sale | Depends on the buyer (shut down if none keeps it running) |
As of October 14, 2026, Character.AI is online and every feature works as before. The company's blog answers user questions about service continuity, paid plans and data in a short FAQ.
Billing is unchanged and paid-feature changes get notice
Character.AI subscriptions remain active and the price has not changed. If something about the service changes in a way that touches paid features, the company plans to warn subscribers first.
The FAQ does not say how long "for now" lasts. That depends on who ends up buying the business and what they decide to do with it. User data, including chat history, stays under the existing Privacy Policy, and Character.AI says its privacy and security practices have not changed.
"Yes, your subscriptions remain active, and billing is unchanged for now. If the service changes in a way that affects paid features, we intend to notify subscribers in advance." (FAQ 4)／"Your information continues to be protected under our Privacy Policy, and our data privacy and security practices are unchanged." (FAQ 5) — from the Character.AI blogView official source →
The platform shuts down if no buyer keeps it running
If the sale ends without a buyer willing to keep Character.AI going, the company will close the platform. The bids decide whether the app survives; the bankruptcy filing alone does not end it. As of October 14, Character.AI has not said when a shutdown would happen or what would become of user data in that case.
"To the extent the Sale Process does not result in a purchase that provides for a continuation of the Character.ai platform, the platform will be wound down." — from Business WireView official source →
Disney bid $20 million for an IP license, not the app
Before filing, Character.AI signed a deal with Disney Worldwide Services, a Walt Disney affiliate. Disney would receive a non-exclusive, perpetual license to some of Character.AI's intellectual property and legal claims. In return, it would pay $20 million and provide transition services through former Character.AI staff it has hired.
A stalking horse sets the opening terms
A stalking horse is the first bidder in a bankruptcy sale, and its offer becomes the floor that rival bids have to beat. Disney plays that role here. Character.AI asked the court to approve bidding rules for the sale, including naming Disney as the stalking horse.
The deal is narrower than a buyout. Disney pays for the right to use certain IP, not for the company or the app, and because the license is non-exclusive, Character.AI can still let other parties use the same IP.
The transition help comes from former Character.AI employees now working at Disney, who will support the safe operation of the platform for a limited time. CNN reports that Karandeep Anand, Character.AI's former CEO, became Disney's chief technology officer in September 2026.
Higher or better offers can still win
Disney's bid can be overtaken: under section 363 of the Bankruptcy Code, a higher or better offer from someone else would take its place. Its $20 million is the starting point of the auction rather than the final result.
"Before the Chapter 11 filing, the Company entered into an agreement with Disney Worldwide Services, Inc. (“Disney”) under which Disney will serve as stalking horse bidder for a non-exclusive perpetual license of certain Company intellectual property and certain Company claims, in exchange for $20 million and Disney’s provision of transition services using former Company employees it has hired." (second paragraph) — from Business WireView official source →
39 states and DC ask any buyer to protect users' chats
On October 14, 2026, attorneys general from 39 states and the District of Columbia filed a notice in Character.AI's bankruptcy case. It sets out nine protections they expect from anyone who buys the business, the app or users' data, chat logs included.
The attorneys general filed a notice on October 14
The coalition, led by Colorado Attorney General Phil Weiser, filed a notice of interest and reservation of rights in the Delaware bankruptcy court. Connecticut's release lists 39 states plus DC as participants. Several states had been investigating Character.AI since a 2024 wrongful-death lawsuit, and they failed to agree on safeguards with the company before it filed.
The states also say Character.AI's own limits on minors fall short. The company stopped open-ended chat for users under 18, but the states point out that this was voluntary and that a new owner could undo it.
"Although Character.AI has recently voluntarily restricted minors' access to certain chatbot features, the states have raised concerns that these measures are not compulsory, incomplete, and could be circumvented or reversed by a future purchaser." — from the Connecticut attorney generalView official source →
Nine protections the states want from a buyer
The states want any buyer to follow each state's consumer protection and privacy laws, and they spell out nine practices to get there. For now they are only demands. The court has not made them conditions of the sale.
The nine protections the attorneys general asked of any buyer
| Item | What the states ask for |
|---|---|
| 1. Age assurance | Age checks that don't rely only on a self-declared birthdate |
| 2. Protections for minors | Keep limits on open-ended chat for minors and filter harmful content in Stories |
| 3. Remove misleading chatbots | Take down characters posing as therapists, doctors, lawyers or other licensed professionals |
| 4. Crisis safeguards | Detect and respond to self-harm, suicide, eating-disorder and substance-abuse content |
| 5. Privacy program | Get consent before processing sensitive data such as health details shared in chats |
| 6. Advertising opt-outs | Account-level opt-outs that also honor earlier opt-outs |
| 7. Limits on secondary use | No training or ad use of chats beyond what users and parents agreed to |
| 8. Access and deletion | Let every user delete their data before it is sold |
| 9. Truthful marketing | No false claims about safety, suitability for minors, whether characters are human, or credentials |
Minors' data is a big part of the worry. The states argue that weak age checks from 2022 through 2025 mean a significant amount of under-18 data was likely misclassified as adult data. Citing Kentucky's complaint, the notice says more than 21.6 million U.S. accounts had been created by March 13, 2025, and more than 2.1 million of them listed an age under 18.
The states kept the right to object to the sale
Each state reserved the right to object to the sale, the bidding rules or a bankruptcy plan. They can also ask the court to appoint a consumer privacy ombudsman, an independent reviewer who looks at how a sale would affect personal data.
None of this stops users' chats from changing hands in the sale yet. The states want a deletion window first, but nobody has promised one. Decide whether to keep or delete your chats before the sale is settled.
"the States would advocate that any purchaser be prepared to implement appropriate processes and procedures to comply with regulatory requirements" (paragraph 25) ／ "more than 21.6 million U.S. user accounts had been created by March 13, 2025, including more than 2.1 million accounts with a declared age under 18" (paragraph 1) ／ "Character.AI was widely used by minors without adequate age verification from 2022 through 2025, making it likely that significant under-18 user data was misclassified as adult data." (paragraph 12) ／ "the right to seek the appointment of a consumer privacy ombudsman under 11 U.S.C. §§ 332 and 363(b)(1), to object to any proposed sale, bidding procedures, or plan" (Section VIII) — from the state attorneys general noticeView official source →
How to export your Character.AI chats before the sale closes
Character.AI's Help Center says a data export can take 3 to 4 weeks to arrive. With the sale expected to close in late November or early December, an export requested on November 1 would arrive on November 22 at the earliest, right as the sale is due to finish.
If you wait to see how the sale turns out, a shutdown could be decided before your export arrives. Anyone who wants a copy of their chats should request it now.
Export and sale dates for a request made on November 1, 2026
| Date | What happens |
|---|---|
| October 12, 2026 | Chapter 11 filing |
| November 1, 2026 (example) | Export requested |
| November 22, 2026 at the earliest | Download link arrives by email (3 weeks after the request) |
| Around November 29, 2026 | Download link expires (7 days after the email) |
| Late November to early December 2026 | Sale expected to close |
Exporting your chats on the Character.AI website
On the website, the export option sits in your profile's account settings. Open your Profile, go to Profile Settings, choose Account, then Manage Account & Data, and click Export Data. A pop-up confirms that a download link will be emailed to you.
Exporting your chats in the Character.AI mobile app
In the app, the same option lives under Legal & Privacy. Open your Profile, tap the Settings icon, tap Legal & Privacy and then Export Data. A "Success" banner appears once the request goes through.
The download link expires after seven days
The emailed download link works for seven days from the moment it is sent. It goes to the address tied to your account, so check that inbox and save the file promptly.
Character.AI also lets you delete your account from the app or the website. The help article does not say whether deleting before the export arrives is safe, so wait until you have the file.
"Please note that exports can take 3-4 weeks to process."／"The link will be valid for 7 days from the time the email is sent, so be sure to download your data before it expires." — from the Character.AI Help CenterView official source →
Lawsuits over teen users came before the filing
Character.AI's CEO, Colin Adams, pointed to legal, regulatory and operational pressure as the reason for the filing. In the year before it, the company settled lawsuits brought by families of teen users and ended open-ended chat for minors.
The CEO cited legal, regulatory and operational headwinds
In the statement announcing the filing, Adams said the company had spent the past year trying to keep the business going and improve it. He added that the board chose a court-supervised sale after weighing the alternatives. The company did not spell out which legal or regulatory problems it meant.
"Over the past year, Character.ai has taken meaningful steps to sustain and improve its business in the face of significant legal, regulatory, and operational headwinds,” said Colin Adams, CEO of Character.ai. (fourth paragraph) — from Business WireView official source →
Five family lawsuits were settled earlier in 2026
Earlier in 2026, Character.AI agreed to settle five lawsuits brought by families over teen users, CNN reports. One of them was filed in 2024 by a Florida mother who blamed the platform for her 14-year-old son's suicide. Other families sued over claims that the chatbots exposed children to sexual content or encouraged self-harm and violence.
Character.AI has not linked the settlements to the bankruptcy. According to CNN, the filing lists assets of $50 million to $100 million. CNN also notes that the company's founders, former Google engineers Noam Shazeer and Daniel de Freitas, have since gone back to Google.
"Character.ai has between $50 million and $100 million in assets, according to its bankruptcy filling."／"Character.ai agreed to settle five cases, including Garcia’s, earlier this year." — from CNNView official source →
Under-18 open-ended chat was set to end in November 2025
On October 29, 2025, Character.AI announced that users under 18 would lose open-ended chat with its AI characters no later than November 25. During the transition, teen chat time was capped at two hours a day and scheduled to shrink week by week.
The company said questions from the press and regulators about what teens encounter in AI chats drove the change. In place of free-form chat, it said it would offer under-18 users ways to make videos and stories with characters.
"First, we will be removing the ability for users under 18 to engage in open-ended chat with AI on our platform. This change will take effect no later than November 25."／"The limit initially will be two hours per day and will ramp down in the coming weeks before November 25." — from the Character.AI blogView official source →
Bottom line: Character.AI's future depends on the buyer
Character.AI filed for Chapter 11 on October 12, 2026, and is being sold under court supervision. The app and subscriptions work for now, but the platform closes if no buyer keeps it running, and Disney's $20 million buys an IP license rather than the app.
Attorneys general from 39 states and DC have asked any buyer of user data to adopt nine protections, including a chance for users to delete their data first. The sale is expected to close in late November or early December. If you want to keep your chats, request an export now, since it can take 3 to 4 weeks to arrive.
FAQ
- Is Character.AI shutting down?
- Not yet. As of October 14, 2026, the platform is running and every feature still works. The company expects the sale to finish in late November or early December, and the service ends only if no buyer agrees to keep it going.
- Should I cancel my Character.AI subscription?
- There is no billing reason to cancel right away. Character.AI says paid plans stay active and charges are the same for now, and it plans to tell subscribers before any change to paid features. Whether the service survives the sale is still open, so the choice depends on how long you plan to keep using it.
- Did Disney buy Character.AI?
- No. Disney's $20 million offer covers a non-exclusive, perpetual license to some of Character.AI's intellectual property and legal claims. It does not buy the company or the app, and a better offer from another bidder would take priority.
- Will my Character.AI chats be sold?
- Nothing has been decided. Character.AI has not announced a buyer for user data, and Disney's bid covers an IP license. The attorneys general of 39 states and DC have asked that any buyer give every user a chance to delete their data before a sale, but that is their demand, not a court order. If you want a copy of your chats, request an export before the sale is settled.
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