Character.AI enters Chapter 11 and seeks buyer to keep platform operating

Character.AI has begun a voluntary Chapter 11 bankruptcy process to sell its business under court supervision. The platform remains operational, but the company warned it could close if no proposal emerges that allows the service to continue.

The proceedings are taking place in the U.S. Bankruptcy Court for the District of Delaware. A court document cited by TechCrunch lists estimated assets and liabilities at between $50 million and $100 million each.

Disney Worldwide Services will act as the opening bidder with a $20 million proposal. It covers a non-exclusive perpetual licence to some intellectual property and certain company claims. It is not an agreement to acquire the entire platform. Disney will also provide transition services using former Character.AI employees it has hired.

Chief executive Colin Adams attributed the decision to legal, regulatory and operational difficulties. The company expects the sale process to finish in late November or early December 2026.

Character.AI said users could still access all services. Continued operation after the sale depends on whether an actionable proposal emerges to keep the platform running.