Character.AI Files for Chapter 11 Bankruptcy as Disney Offers $20 Million for Assets

Tuesday 13 October 2026 17:40

Character.AI Seeks Bankruptcy Protection

Character.AI, the company behind the popular chatbot platform, has filed for Chapter 11 bankruptcy protection in the United States and agreed to sell some of its assets to Walt Disney for $20 million.

The company said it has formally launched a court-supervised asset sale as part of the bankruptcy proceedings. The assets include a license covering certain intellectual property rights.

Disney Sets the Initial Bid

As part of the process, Character.AI is seeking court approval for auction procedures that would designate Disney as the initial or “stalking horse” bidder.

Disney’s offer would establish a minimum price for the assets, while allowing other potential buyers to submit competing bids at higher values.

Character.AI expects the sale process to be completed by late November or early December 2026, according to Reuters.

Company Assets and Liabilities Estimated at Up to $100 Million

Court documents show that Character Technologies, the U.S.-based company that owns the generative AI platform, has estimated assets and liabilities ranging between $50 million and $100 million.

Colin Adams, CEO of Character.AI, said the company’s board had conducted a comprehensive review of available alternatives before determining that a court-supervised sale offered the best opportunity to maximize value for all stakeholders.

Character.AI Plans to Continue Operating

Despite the bankruptcy filing, the company said it intends to continue operating its business, including the Character.AI platform, with minimal disruption to users throughout the sale process.

However, if the proceedings fail to produce a buyer willing to continue operating the platform, Character.AI said the service would eventually be phased out.