Character.AI files for Chapter 11 and names Disney its $20 million stalking horse bidder
The chatbot platform stays up during the sale, but it'll be wound down if no buyer wants to run it.
Character.AI filed for Chapter 11 bankruptcy on October 12, 2026, to sell the company under court supervision. The chatbot platform announced it on its own blog and in a press release that went out at 11:50 pm Eastern.
Disney is first in line. Before filing, Character.AI agreed to give a Disney affiliate a non-exclusive perpetual license to some of its intellectual property and some of its legal claims, for $20 million.
- Company
- Character Technologies, Inc. d/b/a Character.AI
- Filed
- October 12, 2026
- Court
- District of Delaware, Case No. 26-11603
- Stalking horse
- Disney Worldwide Services, $20 million
- Sale expected
- late November or early December 2026
What Disney gets
Disney Worldwide Services is the stalking horse bidder, so its offer sets the price other buyers have to beat. Anyone can still come in with a better one under section 363 of the Bankruptcy Code.
There's more to it than cash, though. Disney has hired former Character.AI employees, and it'll use them to provide transition services that keep the platform running safely for a limited time while the sale goes on. The license is non-exclusive (and perpetual), so Disney wouldn't be the only company allowed to use that IP.
Colin Adams, Character.AI's CEO, gave the company's reason in the release.
Over the past year, Character.ai has taken meaningful steps to sustain and improve its business in the face of significant legal, regulatory, and operational headwinds,
He didn't say what those headwinds were. The blog post doesn't either.
What happens to users
For now, nothing changes. The platform is up, paid subscriptions stay active and billing is the same. Character.AI says it'll warn subscribers ahead of any change that affects paid features, and users can still delete their accounts or export their data.
That holds only if someone buys the platform to keep it going. The company's blog is plain about the alternative.
If such a bid is unavailable, however, the platform will be wound down.
So I'd read the Disney deal as a price floor for the IP. Nothing in the release says Disney plans to run the chatbot service itself.
Character.AI has asked the court to approve the bidding rules and its usual first-day motions, so it can keep paying staff and vendors while the sale runs. Court filings are posted on the case site run by Stretto, its claims agent, and the company expects the sale to close in late November or early December 2026.
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