A court-supervised sale
Character Technologies, the company behind the Character.ai chatbot platform, filed for Chapter 11 bankruptcy in Delaware on Oct. 12. In its filing the company listed estimated assets and liabilities of between $50 million and $100 million each.
The case is meant to support a sale of all or most of the business. Disney agreed before the filing to act as stalking horse bidder, offering $20 million for a non-exclusive perpetual license to certain intellectual property, along with transition services provided by former Character.ai employees it has hired. That bid sets a floor, and other buyers can top it. The sale is expected to close in late November or early December.
Lawsuits over teen safety
Character.ai lets users chat with bots modeled on celebrities and fictional characters, or build their own. The bots answer with human-like cues, adding references to gestures and expressions. The product grew quickly after launching in 2021 and became one of the best-known consumer AI apps of the ChatGPT era.
The company has since faced a wave of claims that its app contributed to mental health problems and suicides among teenagers. Karandeep Anand, hired as chief executive in 2025 to improve its safety record, left last month to become Disney's chief technology officer.
What happens to the app
Character.ai says the platform will keep running during the process. If no buyer willing to operate it steps forward, the service would be wound down and its technology sold off in pieces.
The case is a test of what happens to consumer AI companies that scale fast on engagement but cannot cover their costs once legal and safety bills arrive. Wilson Sonsini is advising the company, with Areté Partners as restructuring adviser and Houlihan Lokey as investment banker.