Character Technologies filed for Chapter 11 bankruptcy protection in Delaware on October 12, 2026, listing between $50 million and $100 million in both assets and liabilities and reporting losses of $8 million to $9 million a month, despite an active user base of roughly 12 million. Disney has stepped in as the stalking-horse bidder, offering $20 million for a nonexclusive, perpetual license to intellectual property and certain claims, according to Variety and Deadline; it is not buying Character.AI itself or the chatbot platform, and is seeking a nonexclusive license to specified AI technology and patents, along with certain claims, without buying the consumer platform or its user data. A Delaware bankruptcy judge approved auction procedures on October 30, with a November 20 bid deadline and a November 23 auction, a $21.7 million minimum for a competing bid targeting the same assets, and up to $700,000 in bid protections for Disney. The company expects the sale process to finish by late November or early December, the app keeps running, and users can still delete their accounts or download their data; Character.AI has said that if no bid supports continued operation, the platform will be wound down. Its troubles trace to an August 2024 Google licensing agreement reportedly valued at about $2.7 billion that brought co-founders Noam Shazeer and Daniel De Freitas back in-house along with much of the core engineering team, leaving a smaller team to compete against