Character.AI files for bankruptcy, agrees to sell assets to Disney for $20 million

AI company Character.AI has filed for bankruptcy protection in the United States and agreed to sell a portion of its assets to Walt Disney for $20 million. The company has officially initiated the asset sale process under Chapter 11 proceedings, selling off certain intellectual property.

Character.AI is seeking court approval for auction rules, designating Disney as the "stalking horse bidder." Disney's offer will serve as the minimum bid, though other bidders may submit higher offers. The company anticipates the asset sale will be completed by late November or early December 2026.

During this period, Character.AI intends to continue its existing operations to minimize service disruptions. If a buyer willing to operate the Character.AI platform is not found, the company will proceed with a phased business wind-down.

Character.AI operates as a platform driven by large language models, enabling interaction with virtual characters and chatbots. The platform hosts millions of AI characters created by users or officially, representing figures from anime, gaming, historical personalities, and fictional narratives.