Character AI filed for Chapter 11 bankruptcy on October 14, 2026, amid lawsuits alleging its chatbots encouraged minors to self-harm. Disney made a $20 million stalking horse bid to license its technology and characters, and committed to hiring the majority of the workforce alongside the bid. The filing lists $50 to $100 million in liabilities, with compute at $10 million a month against peak subscription revenue of $2.8 million. The fate of Character AI's user data, including data about children, remains unresolved in the bankruptcy.