Character.AI has filed for Chapter 11 bankruptcy as it tries to sell the business while keeping its chatbot platform online.

In its October 12 update, Character.AI said the court-supervised sale should finish by late November or early December. The company also warned that if no workable bid emerges, the platform could be wound down.

Jane Manchun Wong highlighted the Chapter 11 filing shortly after the company’s announcement.

Reuters reports that Disney has agreed to pay $20 million for certain assets and a non-exclusive perpetual license to Character.AI intellectual property. Character.AI cited legal, regulatory and operational pressures; the service remains available and subscriptions continue for now.

WFAA previously covered Character.AI’s legal pressure and settlements involving teen-safety allegations.

The collapse lands amid broader scrutiny of AI products, from public concern about rapid AI growth to regulatory attention on agentic AI and new work on monitoring risky AI behavior.

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