Character.AI has filed for Chapter 11 bankruptcy protection in the United States. It plans to keep operating while its assets are sold under court supervision. The company cited significant legal, regulatory, and operational headwinds.
Character.AI has entered into a stalking-horse agreement with The Walt Disney Company for $20 million. The agreement would give Disney a non-exclusive, perpetual license to some of Character.AI’s intellectual property. The deal is subject to higher or better offers in the bankruptcy court’s bidding process, which is expected to conclude in late 2026.