Character.AI files for Chapter 11 bankruptcy, with Disney as first bidder
On 12 October 2026, Character.AI began a Chapter 11 bankruptcy case in Delaware to run a court-supervised sale of its assets. Disney agreed to be the first bidder, offering $20 million for a non-exclusive licence to some of its technology. The app is still online. If no buyer bids, the company says the platform will be wound down.
The short version
- 01Character.AI began a Chapter 11 case on 12 October 2026 to sell all or most of its assets through a court.
- 02Disney is the opening bidder: $20 million for a non-exclusive licence to some of its technology. Others can bid higher.
- 03The app stays online for now, and paid subscriptions and billing are unchanged for now.
- 04If no buyer bids, the company says the platform will be wound down. The sale should finish in late November or early December.
At a glance
| Filed | 12 October 2026, US Bankruptcy Court, Delaware |
|---|---|
| Type | Chapter 11 (a court-run restructuring or sale) |
| Opening bid | Disney: $20 million for a non-exclusive licence to some of its technology |
| Expected sale | Late November or early December 2026 |
| App status | Still online. Paid subscriptions active, billing unchanged for now |
| If no buyer | The platform will be wound down, the company says |
| Status | Confirmed |
What happened to Character.AI?
Character.AI, the app where people chat with AI characters, said on 12 October 2026 that it had started a voluntary Chapter 11 bankruptcy case in the US Bankruptcy Court for the District of Delaware. It wants a court-supervised sale of all or substantially all of its assets, according to its announcement.
The company says it took steps to sustain its business over the past year amid "significant legal, regulatory, and operational headwinds", and that a court-supervised sale gives the best chance to maximise value for everyone involved.
What is Disney's part?
Before filing, Character.AI agreed that a Disney company, Disney Worldwide Services, would be the stalking horse bidder, which means the first bidder that sets the price to beat. Disney would pay $20 million for a non-exclusive, perpetual licence to certain Character.AI intellectual property and certain company claims.
Disney would also provide transition services using former Character.AI employees it has hired. The deal is subject to higher or better offers, so other buyers can still bid. This is from the company's press release.
Is the Character.AI app still working?
Yes. The company says the platform remains up and running. Paid subscriptions stay active and billing is unchanged for now. If the service changes in a way that affects paid features, it says it intends to tell subscribers in advance.
You can delete your account or export your data in the app or on the Character.AI website. The company says its privacy and security practices are unchanged.
Could Character.AI shut down?
The company hopes the sale will produce an offer that lets the platform keep running. It also says: "If such a bid is unavailable, however, the platform will be wound down." It expects the sale process to finish in late November or early December 2026.
Why does it matter?
Character.AI was one of the best-known apps for chatting with AI characters. Its filing shows that a popular AI app can still struggle with costs and legal pressure. For its users, the next few weeks decide whether the app continues.
What's next?
The court must approve the bidding rules and any sale. Watch for other bidders and for the court's decision in late November or early December.
Questions people ask
Did Character.AI go bankrupt?
It began a voluntary Chapter 11 bankruptcy case on 12 October 2026 to sell its assets through a court. It says it intends to keep operating during the sale.
How much is Disney paying?
Disney would pay $20 million for a non-exclusive perpetual licence to some Character.AI technology and claims. Other buyers can still bid higher.
Can I still use Character.AI?
Yes. The company says the platform is still up and running and paid subscriptions remain active.
What happens to my chats and data?
The company says its privacy and security practices are unchanged. You can delete your account or export your data in the app or on the website.
What is Chapter 11?
A US court process in which a company can keep operating while it restructures its debts or sells its assets.
Sources
- PrimaryCharacter.ai blog: An Update on Character.ai (12 Oct 2026)
- PrimaryCharacter.ai press release via Business Wire: Initiates Voluntary Chapter 11 Proceeding to Facilitate Value-Maximizing Sale Process (12 Oct 2026)
- CoverageTechCrunch: Just 5 years in, interactive chatbot platform Character.AI files for bankruptcy (13 Oct 2026)
Why "Confirmed"? We label a story "Confirmed" when the company or government announced it itself. Spotted an error? Email hello@openloopnews.com and we will correct it.
