Character.ai files Chapter 11, with Disney as stalking horse bidder

Character.ai said on 12 October 2026 that it has started a voluntary Chapter 11 case in the US Bankruptcy Court for the District of Delaware to run a sale of all or substantially all of its assets. According to the company's press release, Disney Worldwide Services agreed before the filing to act as stalking horse bidder for a non-exclusive perpetual licence to certain Character.ai intellectual property and certain claims, in exchange for $20 million plus transition services using former Character.ai employees Disney has hired. Higher or better offers can still come in. The release says the sale should close in late November or early December 2026, and that the platform will be wound down if no buyer keeps it running. The company says the service stays up for now, paid subscriptions remain active with unchanged billing, and privacy practices are unchanged. Users can still export or delete their data. Court filings are on Stretto's case site. On Hacker News (278 points, 263 comments), the biggest camp, about six top-level comments, says the real value left in 2024 when Google hired the founders and researchers, leaving a shell. A similar number say the service caused harm and will not be missed, while two defend it as a popular roleplay tool. About four ask what happens to users' chats and whether the privacy policy follows them to a buyer, and a few note the careers page still lists open jobs. No consensus. Sorted take: the $20 million licence covers only certain IP and claims, so read who ends up holding user data before trusting any companion or chatbot service with sensitive conversations.