# Character.AI bankruptcy leaves millions of users’ chats in limbo

> Character.AI’s bankruptcy puts millions of users’ intimate chats at risk of being sold without clear protections.
- Title: Character.AI bankruptcy leaves millions of users’ chats in…
- Summary: Character.AI’s bankruptcy puts millions of users’ intimate chats at risk of being sold without clear protections. Character.AI’s bankruptcy filing risks…
- Keywords: character.ai, data privacy, user data, artificial intelligence, children, bankruptcy, disney, chapter 11, news, politics, world, Character
- Source: Straight Arrow — https://san.com/cc/character-ais-bankruptcy-leaves-millions-of-users-chats-in-limbo
- Published: 2026-10-13T23:44:33+00:00
- Read time: 1 min
- Topics: character.ai, data privacy, user data, artificial intelligence, children, bankruptcy, disney, chapter 11, news, politics, world
## Character.AI files for bankruptcy
Character.AI filed for Chapter 11 bankruptcy Monday to pursue a court-supervised sale of its assets.
## Users’ chats at risk
The company faces lawsuits from Kentucky, Pennsylvania, and a minor whose name is redacted over chatbot interactions.
## Disney as stalking horse
Disney offered $20 million for a non-exclusive license to some intellectual property and legal claims.
## Data sharing concerns
The company’s privacy policy allows sharing user information during a sale of company assets.
## No ombudsman appointed
As of Tuesday, no party asked the court to appoint a consumer privacy ombudsman.
## User data retention
Deleting accounts may not erase all data; the company retains information to comply with legal obligations.
## Kentucky lawsuit
Kentucky alleges chatbots exploited children’s data and posed as friends and companions.
## Pennsylvania lawsuit
Pennsylvania claims chatbots posed as licensed psychiatrists and offered mental health advice.
## Data vulnerability
Schroeder warned detailed user information could be used to target vulnerabilities and harass individuals.
## 23andMe comparison
23andMe’s bankruptcy led to an ombudsman appointment, unlike Character.AI’s case.
## User data risks
User data may transfer in sale; sensitive information and minors’ data could be excluded.
## Disney ties
Disney previously sent Character.AI a cease-and-desist letter and hired its former CEO.
## Sale timeline
Character.AI expects to complete the sale in late November or early December.
## Legal headwinds
The company faces lawsuits from Kentucky, Pennsylvania, and a minor over chatbot interactions.
## Data policy concerns
The privacy policy doesn’t specify what data is shared during sales and doesn’t require buyers to follow terms.
## User action options
Users can delete accounts or download data, but chats may persist after account deletion.
## Key takeaway

Character.AI’s bankruptcy filing risks transferring millions of users’ private chats to new owners with limited legal safeguards.