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Character.ai files for bankruptcy and Disney opens the bidding with $20 million for a license
IA en un minuto newsroom · Editor: Jon Elgezabal
In 30 seconds
Character.ai has asked the Delaware court to sell its assets through Chapter 11 and, in the meantime, is keeping its chatbot platform open. Disney starts the bidding with $20 million in exchange for the right to use part of its intellectual property, and any other party can bid higher. If the final buyer does not keep the service, the platform will disappear.
Character.ai, the platform for chatting and building stories with artificial intelligence characters, announced on Monday, October 12, that it has filed for Chapter 11, a U.S. bankruptcy procedure that in its case will be used to sell all or nearly all of its assets under court control. The petition was filed with the bankruptcy court for the District of Delaware, and the company intends to keep operating while the sale runs.
Before filing, it signed an agreement with a Disney affiliate, which will act as the first bidder: its offer sets the starting point for the auction, and any other buyer can beat it. Disney would pay $20 million for a perpetual, non-exclusive license to part of Character.ai's intellectual property and to some of its legal claims. It would also provide transition services using former company employees it has already hired, so that the platform can keep operating safely for a limited time.
Under the timeline it has proposed to the court along with the bidding rules, the sale would close in late November or early December 2026. Until then, the company expects to keep the service running with minimal disruption and has asked the judge for permission to keep paying wages and suppliers and to honor its commitments to users. If the sale does not bring a buyer that keeps the platform going, it will be shut down.
Its CEO, Colin Adams, says that over the past year the company has taken steps to sustain and improve the business despite "significant legal, regulatory, and operational headwinds," and that the board, after reviewing the alternatives, sees this court-supervised sale as the best way to get the most value for everyone involved.
In its court filings, Character Technologies, the U.S. company that owns the platform, puts both its assets and its liabilities in a range of $50 million to $100 million, according to Reuters (as published by NBC News). Two former Google employees founded the company in 2021; in 2024, Google licensed its technology and rehired both founders.
The platform faces several legal fronts. This year, Character.ai and Google agreed to settle lawsuits brought by families, including one by a Florida mother who accused the chatbot of encouraging her 14-year-old son to take his own life. Kentucky has sued it, with the state alleging that its chatbots pushed users toward self-harm, and Pennsylvania claims some of them posed as doctors. In September 2025, Disney sent it a letter demanding that it stop using its characters without permission, and Character.ai removed them. Last month, according to Gizmodo, Disney hired Karandeep Anand, Character.ai's former CEO, as its first chief technology officer.
Why it matters · analysis and opinion
The bankruptcy shows how fragile a companion chatbot business becomes when lawsuits and regulatory pressure pile up, however popular it is with its users. Disney is not taking over the company: it is securing a right of use that shuts nobody else out, after having already hired its former boss and part of its technical team. It is the same move Google made with its founders: the giant takes the talent and the technology without shouldering the company or its lawsuits. For people who use the platform, the sensible thing is to save whatever matters to them now, because its future depends on a buyer willing to keep it running.
Source: Character.ai (Business Wire) · Written with the help of AI: how we make the news
