Character.AI has initiated Chapter 11 bankruptcy proceedings in the United States. The company reported estimated assets and liabilities ranging from $50 million to $100 million. The startup, which previously reached a valuation of approximately $2.5 billion, is now seeking a buyer to maintain its platform operations.
Disney has emerged as the lead bidder, offering $20 million for a non-exclusive, perpetual license to specific intellectual property and assets. This bid serves as the starting price for a court-supervised auction. Other potential buyers may submit higher offers before the process concludes, which is expected by late November or early December 2026.
The company plans to keep its chatbot service active during the sale, though it warned of a potential shutdown if no buyer is found. Character.AI faced significant challenges, including high operating costs, leadership changes, and legal scrutiny regarding user safety. In 2024, the firm reduced its workforce by 5% and signed a licensing deal with Google.
The involvement of Disney follows the recent appointment of former Character.AI CEO Karandeep Anand as the media giant's chief technology officer. Disney had previously raised concerns regarding the unauthorized use of its intellectual property on the startup's platform. The board stated that the bankruptcy sale is the optimal path to maximize value for stakeholders.
