Character.AI has entered Chapter 11 and is seeking a court-supervised sale of all or substantially all its assets. Its chatbot service remains available during the process, the company said on October 12. Disney has agreed to make an opening offer for certain intellectual property and company claims, but that offer does not settle who will run the platform after the sale.

The big change

  • What changed: Character Technologies began a voluntary Chapter 11 case in Delaware. Disney Worldwide Services is the proposed opening bidder for a non-exclusive, perpetual license to certain company intellectual property and claims, in exchange for $20 million and transition services.
  • Why it matters: Users can still access the platform and paid subscriptions, but the company says it will wind the platform down if the sale does not produce a purchase that provides for continued operation.
  • What to watch: The court's treatment of proposed bidding procedures, other offers and the final sale terms. Character.AI expects the process to finish in late November or early December, an estimate rather than an approved closing date.

What Disney has offered

In its October 12 announcement, Character.AI said it had reached an agreement with Disney Worldwide Services before filing. Disney would serve as the stalking-horse bidder: its offer sets a starting point for a process in which higher or better bids can be considered. Character.AI says it has filed a motion asking the bankruptcy court to approve the bidding procedures and Disney's proposed role.

The specific offer is a non-exclusive perpetual license to certain Character.AI intellectual property and certain company claims. Disney would pay $20 million and provide transition services through former Character.AI employees it has hired. The announcement does not identify the licensed technology or claims. A perpetual, non-exclusive license also does not, by itself, transfer ownership of the whole platform or establish that Disney will operate it.

Character.AI is pursuing a broader sale of all or substantially all its assets. The Disney arrangement and that broader sale have different scopes, so the $20 million should not be read as an agreed price for the entire business. Character.AI says the Disney arrangement is subject to higher or better offers. The final buyer and service plan remain unresolved.

What users can do during the process

Character.AI's user FAQ says the platform is running and all services remain accessible. Paid subscriptions remain active, with billing unchanged for now. The company says it intends to notify subscribers in advance if service changes affect paid features. Its announcement says it expects minimal disruption during the sale, but continued operation after a sale has not been secured.

Users who want a copy of their account information can request an export through the web or mobile app. Character.AI's October 8 export instructions say requests can take three to four weeks to process. The emailed download link is valid for seven days after it is sent. On the web, the route is Profile → Profile Settings → Account → Manage Account & Data → Export Data; on mobile, Profile → Settings → Legal & Privacy → Export Data. These are the company's documented options; BIG CHANGE did not test the export or verify what a completed archive contains.

The company says its privacy and security practices are unchanged for now and that users can delete their accounts through its website or app. Neither the announcement nor the FAQ specifies the data terms of a future sale. Its privacy help page summarizes existing access and deletion rights, which may vary by region. The documents do not establish a transfer of chat histories or automatic deletion.

The decision still ahead

Character.AI says it chose Chapter 11 after reviewing alternatives amid legal, regulatory and operational pressures. Its release describes first-day motions intended to support wages, user commitments and vendor obligations during the case; those are requests for court approval, not proof that every requested measure has been granted.

The company hopes for a sale proposal that allows the platform to keep operating, and says it will wind the platform down if no such proposal is available. For users, the useful milestones are the court's bidding rules, the offers made under them and a buyer's stated plan for the live service.

Sources & further reading