Character.AI, which has 12-20 million users, has filed for bankruptcy but is not shutting down yet; it is still running while it goes through Chapter 11 bankruptcy, and the company expects the court-supervised sale to be complete by the end of November or early December 2026. Character Technologies filed on October 12, 2026 in Delaware, citing the high costs of developing and expanding AI entertainment, plus potential litigation-related liabilities and regulatory engagement. The company has said it could wind down if no buyer emerges willing to continue operating the platform, and Disney's $20 million bid is reportedly for an IP license only, so the app survives only if another buyer steps in. Character.AI says its data privacy and security practices are unchanged, but a buyer could potentially receive user data, which is why regulators have stepped in; on October 14, 40 state attorneys general urged the bankruptcy judge to protect young users and keep their data safe, seeking conditions on any sale including age verification, limits on using data for AI training, and deletion rights, while Character.AI disputes the states' portrayal of its safety record. Users can export their data or delete their accounts through the app or website, and reports indicate exports took three to four weeks in October.