Character AI files for Chapter 11: is it shutting down?

Character AI is not closing today, but its future now depends on a court-run sale. This page sets out what the company has said, what the court records show, and what it means if you use the app.

What happened

On October 12, Character Technologies, Inc., which runs Character AI, filed a voluntary petition under Chapter 11 of the US Bankruptcy Code. The case is No. 26-11603 in the US Bankruptcy Court for the District of Delaware, and the company's claims agent, Stretto, publishes the filings. Its proposed advisers are Wilson Sonsini Goodrich & Rosati as counsel, Areté Partners as financial adviser and Houlihan Lokey as investment banker.

The same day, Character AI posted "An Update on Character.ai" on its blog and on its official subreddit. It says the filing is meant "to facilitate a court-supervised sale of the company" after "significant legal, regulatory, and operational headwinds", and that its board chose this route after reviewing the alternatives. It hopes the sale "will yield an actionable proposal that will allow continued operations of the Character.ai platform". If not: "If such a bid is unavailable, however, the platform will be wound down."

Does the app still work?

Yes. Character AI says the platform "remains up and running, and you can continue to access all services at this time". Its answers for users:

• Subscriptions: c.ai+ and c.ai lite stay active and "billing is unchanged for now". If paid features change, it intends to notify subscribers in advance.
• Your data: chats remain under the current privacy policy, and security practices are unchanged. You can export your data or delete your account in the app or on the website.
• Timing: it expects the sale process to be complete "by the end of November or perhaps early December 2026".

Our Character AI pricing page lists the current plans and what each costs.

Who wants to buy it?

Reports of the court filings by The Next Web, The Hollywood Reporter and others say Disney made the first bid: 20 million dollars for a non-exclusive, permanent license to some of Character AI's intellectual property and certain legal claims, along with former Character AI staff, now at Disney, helping keep the platform running safely for a while. As reported, that bid is for a license, not for the app itself. It sets a floor price; under the court's rules other buyers can still bid more, and Character AI has asked the court to approve those bidding rules. Reuters, cited by The Next Web, reported estimated assets and liabilities of 50 to 100 million dollars.

Disney and Character AI have history: in September 2025 Disney sent Character AI a cease-and-desist letter over Disney characters on the platform. The lawsuits page covers the cases the company has faced.

What to do if you use Character AI

• Keep using it if you want to. Nothing has changed in the app, and the company says it will warn subscribers before paid features change.
• Export what you want to keep. If the platform is wound down, chats and characters you have not saved could be lost. Character AI's help center explains how to download your data.
• Think before paying yearly. With the sale due to finish by early December, a monthly plan, or c.ai lite at about half the price of c.ai+, keeps you less exposed than a year paid up front.
• Know the alternatives. Our Character AI alternatives page groups the apps people move to, by what each does better.

We will update this page when the court sets the sale dates, when other bidders appear, and when a buyer is chosen.