Character.AI Files for Chapter 11 Bankruptcy as Disney Acquires Core Assets for $20 Million

Character.AI, the AI chatbot platform that reached unicorn status just four years ago, has filed for Chapter 11 bankruptcy protection in October 2026, marking a dramatic downfall for a startup that once burned with the promise of accessible conversational AI. Disney has agreed to acquire a non-exclusive perpetual license to select intellectual property and certain assets for $20 million, positioning itself as the initial bidder under bankruptcy law, though the deal remains subject to higher or better offers. The sale is expected to close by late November or early December 2026.