Character.AI has filed for Chapter 11 bankruptcy protection in the United States and agreed to sell certain assets to Disney for $20 million. The chatbot company says its platform will remain online during the sale process, including its paid subscription services.
Disney will act as the initial, or “stalking-horse,” bidder. That role sets a minimum offer for the assets while allowing other buyers to submit higher bids. According to court documents cited by Reuters, Disney would receive a perpetual, nonexclusive license for some of Character.AI’s intellectual property. The specific assets and technology covered by the deal have not been disclosed.
Character.AI estimates both its assets and liabilities at between $50 million and $100 million. It expects to complete the sale by late November or early December. The company says it will wind down the platform if no suitable buyer emerges.
Legal pressure and staff moves
The filing follows rising legal and regulatory pressure over the safety of Character.AI’s chatbots. Reuters reports that the company and Google settled a lawsuit brought by the mother of a Florida teenager who died by suicide after allegedly interacting with a Character.AI bot. Kentucky has also sued the company over claims that its bots encouraged self-harm, while Pennsylvania alleges that chatbots presented themselves as doctors.
Disney has separately challenged Character.AI over unauthorized bots based on Disney characters. The Verge reports that Disney sent the company a cease-and-desist letter in 2025, and Character.AI said it removed the disputed bots.
Disney recently hired former Character.AI chief executive Karandeep Anand as its chief technology officer and expects to hire several members of the startup’s technical team. The arrangement follows an earlier talent exodus: Google licensed Character.AI technology and rehired its founders in 2024.
Sources
- Character.ai Files for Bankruptcy – The Verge
- Character.AI files for Chapter 11 bankruptcy in the US, agrees to sell some assets to Disney for $20M, and plans to keep operating as it completes the sale – Reuters
Stay up to date
AI for content creation: the latest tools, tips and trends. Every two weeks in your inbox:
