Character.AI Files Chapter 11: Disney Bids $20M, App Faces Wind-Down Risk

Character.AI, the chatbot app that lets people talk to AI versions of fictional and invented characters, has filed for Chapter 11 bankruptcy in the US. Its opening offer is a $20 million bid from Disney.

That bid is for a license to some of the company's intellectual property, not for the app itself. The company says the app is still running for now, but if no buyer steps forward to keep it alive, it will be shut down.

Based on Character.AI's own October 12 announcement, the Stretto case page for the bankruptcy, and reporting by Reuters, PPC Land, Trending Topics and Fortune, checked October 13, 2026. We have not read the full court filings ourselves; figures from them are as reported by those outlets.

What Character.AI filed, and where

The company behind the app, Character Technologies, Inc., filed a voluntary Chapter 11 petition on October 12, 2026, in the US Bankruptcy Court for the District of Delaware. The case number is 26-11603, according to the case page run by Stretto, the company's claims agent.

In its announcement to users, the company said it had "initiated a voluntary Chapter 11 bankruptcy process to facilitate a court-supervised sale of the company."

A court filing lists estimated assets and liabilities each in the range of $50 million to $100 million, Reuters reported. Chief executive Colin Adams told Reuters the board decided the court process "provides the company with the best opportunity to maximize value for all stakeholders."

PPC Land, which went through the petition, reports that it lists 100 to 199 creditors. According to PPC Land, Google LLC holds the largest unsecured claim on the top-20 list, at about $4.15 million. The states of Pennsylvania and Kentucky appear as litigation claimants, and those claims are marked as disputed.

What Disney is actually buying for $20 million

Disney is the "stalking horse" bidder. Its $20 million offer sets a floor, and other bidders can try to beat it in a court-supervised auction. Reuters describes it as a sale of some assets, including an IP license.

PPC Land, citing the filings, says the bid covers a non-exclusive, perpetual license to certain intellectual property and certain claims. It also covers transition services provided by former Character.AI employees whom Disney has hired. PPC Land's reading is that Disney's offer does not include taking over and running the platform.

The Disney connection is not new. Disney sent Character.AI a cease-and-desist letter in September 2025 over the use of its characters, and in September 2026 it named Character.AI's then-CEO, Karandeep Anand, as its first chief technology officer, Reuters reported at the time. Reuters added then that a number of Character.AI's technical staff were expected to follow him.

What users should expect right now

Here is what the company has told users so far:

• The app is still on. "The Character.ai platform remains up and running, and you can continue to access all services at this time."
• Subscriptions continue. "Yes, your subscriptions remain active, and billing is unchanged for now." The company says that if the service changes in a way that affects paid features, it intends to tell subscribers in advance.
• Your data. "Your information continues to be protected under our Privacy Policy." The company also reminds users that they can delete their account or export their data through the app or the website.
• The worst case. The company says it is looking for a bid that keeps the platform going. "If such a bid is unavailable, however, the platform will be wound down."

Reuters reports that the company plans to keep operating with minimal disruption while the sale goes through.

The catch: the questions nobody has answered yet

The biggest open question for users is what happens to their characters and chat histories if the app is sold or closed. Neither the company's announcement nor the coverage we read says whether chats, custom characters or user data would move to a new owner. They also don't say what would happen to that data if the service is wound down. Shutdown refunds are not addressed either.

The timing is not fixed either. The company says it expects the court-supervised sale to be complete "by the end of November or perhaps early December 2026," and Reuters reports the same window. Either way, users may know within weeks whether the app survives.

Disney's bid is also not final. It still needs court approval, and a higher bid could replace it.

A rough sense of scale, our own calculation: Google paid about $2.7 billion in 2024 to license Character.AI's technology and rehire its founders, Fortune reported. Disney's $20 million opening bid is about 0.7% of that figure. The two deals cover different things, so this shows how much the company's value has fallen, not a like-for-like price.

How it got here

Character.AI was founded in 2021 by former Google engineers Noam Shazeer and Daniel De Freitas. In August 2024, Google rehired both founders and licensed some of the company's technology, according to Fortune.

Lawsuits followed. In January 2026, Google and Character.AI agreed in principle to settle several suits brought by families who said their children were harmed by the company's chatbots, including cases involving suicides. Fortune reported that the terms were not disclosed and the filings contain no admission of liability. Before that, in October 2025, Character.AI had said it would stop users under 18 from having open-ended chats with its characters.

What to do if you use Character.AI

• Export anything you care about now. The company says you can export your data through the app or the website. Do it while the service is running normally. (Our AI chatbot privacy guide covers what chat apps typically keep.)
• Decide about your subscription. Billing continues as usual for now. If you would rather not keep paying while the app's future is unclear, you can cancel through the same place you subscribed.
• Watch for a subscriber notice. The company says it will warn paying users before paid features change.
• Follow the case. The Stretto case page lists court filings. The next big moments are court approval of the bidding rules, any rival bids, and the sale hearing.

Frequently asked questions

Is Character.AI shutting down?

Not yet. The company says the app is running and all services are available. It also says that if it cannot find a buyer that keeps the platform going, the app will be wound down.

Is Disney buying Character.AI?

Not the app. Disney's $20 million offer is for a license to certain intellectual property, according to Reuters. PPC Land, citing the filings, says it also covers transition services from former Character.AI staff Disney has hired. Other bidders can still top it.

What happens to my chats and characters?

The company has not said what happens to them in a sale or wind-down. So far it has only said that data stays covered by its current privacy policy and that you can export or delete it.

The sale is expected to wrap up within weeks. Until it does, the safest move is to export your data and keep an eye on the company's notices and the court docket.