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Tracker: Character.AI's Chapter 11 Bankruptcy

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Summary

A running timeline of the Character.AI Chapter 11 case in Delaware, from the October 12, 2026 filing to the state attorneys general and U.S. Trustee positions on user data.

Character Technologies, Inc., the company behind the Character.AI chatbot platform, filed for Chapter 11 bankruptcy in Delaware on October 12, 2026 (Case No. 26-11603). State attorneys general and the U.S. Trustee's office have since raised concerns in court filings about what could happen to the data of Character.AI users, which the Trustee says include or previously included minors, in any sale. This page collects our coverage in date order and states only what our published posts and their sources establish.

Timeline

  • October 12, 2026: Character Technologies files a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the District of Delaware. A court application the next day cites high costs "coupled with potential litigation related liabilities and regulatory engagement." Our report
  • October 14, 2026: A coalition of state attorneys general files a Notice of Interest and Reservation of Rights, saying "outstanding regulatory, safety, and privacy issues" must be addressed in any sale of the company, its product or its user data, and reserving the right to ask for a consumer privacy ombudsman. Our report
  • October 20, 2026: The Black Box 012 examines 11 U.S.C. 363(b)(1), the Bankruptcy Code provision on consumer privacy ombudsmen, and concludes that the privacy policy effective July 1, 2026 lets the company "disclose certain information" in a "sale of company assets" rather than prohibiting transfer. The Black Box 012
  • October 27, 2026 (reported October 31): The U.S. Trustee's office files an objection saying a consumer privacy ombudsman is needed before any sale of customer data, and calls the company's privacy policy language "ambiguous." Our report That post also notes the company's own reply (Doc. 73, undated in our post) says its policy permits the sale, so an ombudsman is not required, but that it is willing to consent to one "under appropriate circumstances."

What is still unknown

  • Whether the court will appoint a consumer privacy ombudsman. Our posts describe requests and positions, not a ruling.
  • Whether anyone will bid for the user data. The Trustee says the transactions contemplated by the Disney bid ($20 million, for a license to code and patents) "do not appear to include the sale or transfer of either PII (as defined by the Code) or other sensitive personal information," and no buyer for the data has been named in the filings we reviewed.
  • What happens to user data if the platform is wound down without a buyer. The filings reviewed for The Black Box 012 do not say.
  • How the lawsuits against the company will be treated in the bankruptcy. The documents reviewed for our first report did not address it.

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