Character.AI Files Chapter 11 as Disney Bids $20 Million for Assets

Character.AI filed for Chapter 11 bankruptcy protection on Monday, October 12, citing legal, regulatory and operational challenges, according to Reuters and Business Insider. The company's parent, Character Technologies, reported estimated assets and liabilities of between $50 million and $100 million.

Disney has emerged as the lead bidder in the court-supervised sale, offering $20 million for depreciated assets and a potential permanent licence to some of Character.AI's intellectual property. Character.AI said it plans to keep its chatbot platform running through the sale process, though it could shut down if no suitable buyer comes forward.

The filing follows a period of mounting pressure on the company. Character.AI has faced lawsuits alleging its chatbots contributed to psychological harm, including cases involving teenagers who died by suicide.

Separately, Disney hired former Character.AI chief executive Karandeep Anand as its first company-wide chief technology officer. Anand officially joined on October 2 and reports to Disney CEO Josh D'Amaro. Less than a month before the bankruptcy, it was reported that Disney had recruited Anand to oversee technology infrastructure, data and AI platforms, and engineering teams.