Character.ai enters Chapter 11 and puts the company up for a court-supervised sale

Character.ai said on October 12, 2026 that it has started a voluntary Chapter 11 bankruptcy process to run a court-supervised sale of the company. The announcement is an unsigned post on the Character.ai blog. If no buyer makes a bid that keeps the service going, the company says the platform will be wound down.

What Character.ai announced

The Character.ai update (opens in a new tab) gives the reason in one line: over the past year, the company faced legal, regulatory and operational headwinds. Its board reviewed the alternatives and chose a court-supervised sale as the route most likely to get the best value for stakeholders.

According to the post's FAQ, the sale covers all or substantially all of the company's assets. Character.ai hopes a bidder will propose to keep the platform running. The fallback is stated plainly: without such a bid, the platform shuts down.

The company expects the sale process to be complete by the end of November 2026, or perhaps in early December 2026.

The Character.ai bankruptcy case

Court filings and case details sit on a claims and noticing website run by Stretto, Inc., which the post links. The Stretto case page for Character Technologies (opens in a new tab) gives the details the post leaves out. Character Technologies, Inc. filed a voluntary Chapter 11 petition on October 12, 2026, in the United States Bankruptcy Court for the District of Delaware.

The case number is 26-11603 (BLS), and the judge is Brendan Linehan Shannon. The same page lists the company's proposed advisers: Wilson Sonsini Goodrich & Rosati as counsel, Areté Partners as financial advisor and Houlihan Lokey Capital, Inc. as investment banker.

What stays the same at Character.ai for now

Character.ai says the platform is up and all services are still available. Paid subscriptions remain active and billing has not changed. If a change to the service affects paid features, the company says it intends to tell subscribers ahead of time.

On data, the post says user information stays covered by the existing Privacy Policy. Privacy and security practices have not changed. The post does not mention refunds, an API or any developer program.

What the Character.ai privacy policy says about a sale

The Character.ai Privacy Policy (opens in a new tab), effective July 1, 2026, has a business transfers clause. It allows Character.ai to disclose certain information during negotiations or at the closing of a merger, a sale of company assets, a financing or an acquisition. The clause does not list which categories of information that covers.

The same policy lists the information users provide directly. That list includes chat communications, shared Characters, payment information and, for people who use voice features, recordings of their voice.

Who the Character.ai sale matters for

The people most affected are users with chat histories, Characters or paid subscriptions on the platform. Teams that built community tools, research or products around Character.ai content face the same open question: whether a buyer continues the service. The update gives no answer.

Developers who want chat characters on infrastructure they control can run an open model on their own hardware. The HuiaHub guide to running a local LLM with Ollama and calling it from code covers that setup.

How to export or delete Character.ai data

The post reminds users that they can export their data or delete their account, either in the app or on the website. Character.ai's help center has the steps for downloading your Character.ai data (opens in a new tab) and for deleting a Character.ai account (opens in a new tab).

Open questions about the Character.ai sale

• Who the bidders are, and whether any bid keeps the platform running, is unknown.
• The post does not say what happens to chats, Characters or voice data if the platform is wound down.
• Whether a buyer would keep the current Privacy Policy is not stated.
• Refunds for subscribers are not addressed.