Character Technologies filed for Chapter 11 in Delaware on 12 October

On 12 October 2026, Character Technologies, Inc., which does business as Character.AI, filed a voluntary Chapter 11 petition in the United States Bankruptcy Court for the District of Delaware. The petition is docket document 1, stamped filed 10/12/26, in case 26-11603 (BLS), assigned to Judge Brendan Linehan Shannon. Stretto, the claims and noticing agent named for the case, states the same petition date, court, chapter and case number on its case page.

A company release datelined Menlo Park on 13 October 2026 says Character started the case to sell all or substantially all of its assets, intends to keep the platform running during the sale, and will wind the platform down if no buyer continues it. It expects the sale to finish in late November or early December 2026. The copies read here are the National Law Review and Yahoo Finance, whose page metadata stamps the release at 2026-10-13T03:50:00Z. The release quotes Colin Adams, identified there as chief executive, on “significant legal, regulatory, and operational headwinds,” and says the board chose the court-supervised sale to maximize value.

What the declaration says the business costs

Adams signed the first-day declaration, document 18, on 13 October 2026. He states that he is chief executive and a senior managing director at Areté Partners, the proposed financial advisor. Every dollar figure in this section is from that declaration.

For 1 January through 31 August 2026 he states about $56.1 million of compute and about $19.7 million of personnel costs. He states monthly revenue of about $2.8 million in December 2025 and about $5.3 million in August 2026, an operating loss of about $8 million to $9 million a month as of August 2026, and net cash burn of about $8.2 million by that month. At the petition he states no funded debt and about $57 million of unrestricted cash and investments. He states second-half 2024 operating expenses, excluding legal fees, of about $21.9 million a month, including about $13.8 million of compute, and 2025 averages of about $18.5 million a month, including about $10.0 million of compute. August 2026 operating expenses, excluding legal fees, were about $13.3 million on his account. He calls legal costs significant and states no dollar total. He states about 12 million monthly active users and about 120 minutes a day on average. Capital raising, he writes, failed because of potential liabilities and the regulatory environment. A prior banker approached about 28 parties and returned one proposal the company called unworkable. By September 2026, he writes, management feared departures would make the platform unstable.

404 Media, Jason Koebler, 13 October 2026 at 20:06 UTC, describes a narrative filed on Tuesday, which matches the declaration’s file date. The petition date is Monday 12 October. 404 Media calls 2024 compute $13.8 million a month. The declaration limits that figure to the second half of 2024. 404 Media also writes that the company was valued at $1 billion in 2023 after a $150 million round led by a16z. That valuation is not in the declaration.

Disney as a proposed stalking-horse buyer

Adams writes that an independent committee chose Disney Worldwide Services, Inc., and that the parties signed an exclusivity and prepayment agreement on 18 September 2026. He states Disney agreed to pay $7.5 million of $20 million in cash before the petition, of which $2 million is a refundable deposit, and to hire a majority of the workforce, including the chief executive, before the petition date, with transition services afterward. A stalking-horse agreement, he writes, would give Disney a perpetual, worldwide, non-exclusive license to certain intellectual property and related technology, plus a release and a covenant not to sue, as a floor bid open to higher offers. Houlihan Lokey is running the sale, he writes.

The company release describes the same $20 million and the same kind of license. 404 Media says Disney has reportedly offered $20 million to license some intellectual property. The declaration states the payment split and says the bid is still subject to higher offers and court process.

A docket listing opened on 14 October shows a first-day hearing noticed for 14 October 2026 at 1:30 p.m. Eastern before Judge Shannon. Entries on that page through 14 October do not include a hearing order.

Lawsuits, in the company’s words

The declaration says Character has faced personal-injury lawsuits and regulatory investigations about product safety. It says a January 2026 settlement covered the personal-injury cases then on file, and that an August 2026 complaint in the Northern District of California, alleging harm to a minor, is the only outstanding personal-injury lawsuit. It says attorneys general, later totaling 46 states and territories, told the company in November 2025 that it was under investigation. This story does not describe those claims.

The same declaration describes a 2024 transaction in which, it says, Google paid about $2.7 billion, rehired the founders and took a non-exclusive license. It cites the Wall Street Journal for the sum. That article was not opened here. The release names Wilson Sonsini as counsel, Areté as restructuring adviser, Houlihan Lokey as banker and Skadden as Disney’s counsel.