Character Technologies, the company behind the Character.ai chatbot platform, filed a voluntary Chapter 11 petition on Monday 12 October 2026 in the US Bankruptcy Court for the District of Delaware (case 26-11603). The aim is a court-supervised sale of all or substantially all of its assets. The company says the platform will keep running with minimal disruption while that sale plays out.
Ahead of the filing it agreed a deal with Disney Worldwide Services, a Disney affiliate, which will act as the stalking-horse bidder, the opening offer that other bidders must beat. Disney's bid is $20m for a non-exclusive, perpetual licence to certain Character.ai intellectual property and certain company claims. It also comes with transition services from former Character.ai staff whom Disney has hired. PPC Land points out that this is a licence to IP, not a purchase of the app, which is why the platform's future is not secured by the offer.
“To the extent the Sale Process does not result in a purchase that provides for a continuation of the Character.ai platform, the platform will be wound down.”
Character.ai company statement, in a company statement · ppc.land ↗
The petition was signed by chief executive Colin M. Adams. The company is advised by Wilson Sonsini as counsel, Houlihan Lokey as investment banker, Areté Partners on restructuring and Stretto as claims agent, while Skadden acts for Disney. The board set up a special restructuring committee on 8 October. Assets and liabilities are each put at between $50m and $100m, with 100 to 199 creditors, and the filing indicates funds will be available to unsecured creditors.
The twenty largest unsecured claims add up to about $10.69m across the seventeen with figures attached. Google is listed at $4.15m, law firm Hogan Lovells at $2.13m, DigitalOcean at $1.95m and Fireworks.ai at $0.81m, the last of these disputed. Pennsylvania, Kentucky and a redacted minor plaintiff appear as litigation claimants, with amounts unknown and disputed. PPC Land also notes that the company's ads.txt file lists 44 seller lines, eight direct and 36 resellers, including a direct Google account, though advertising is not mentioned in the bankruptcy papers. A Pennsylvania medical-board suit from 1 May 2026 had cited more than 20 million monthly users and 18 million user-made characters.
Generic illustration Unite.AI ran with its report of the Chapter 11 filing and Disney stalking-horse deal
Image: Unite.AI
The company frames the sale as the best way to preserve value after what it calls legal, regulatory and operational pressure, and says a safe experience for users remains a priority. It also states that, should no buyer commit to continuing the platform, the service will be shut down. Since Disney's bid as described makes no provision for continuation, PPC Land infers that survival depends on a different bidder.
The route here is a long one. Disney sent Character.ai a cease-and-desist over its characters at the end of September 2025, and the company removed them. Outlets differ on the exact date: TheWrap's contemporaneous report points to 30 September, while another outlet says October. Disney then named Karandeep Anand, Character.ai's former chief executive, its first chief technology officer on 18 September 2026, and some technical staff followed him. Earlier, Google struck a $2.7bn licensing deal with Character.ai in August 2024, and teen-safety lawsuits were settled in January 2026, according to outlets PPC Land cites. PPC Land adds that Disney's December 2025 licensing deal with OpenAI over Sora never closed after Sora shut in March 2026.
Next, a motion on bidding procedures has been filed, with a sale and closing expected in late November or early December 2026, and other bidders may top Disney's $20m. First-day motions to pay wages and honour commitments to users and vendors await court approval.
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