Character.AI files for bankruptcy: families and schools need a plan for when a chatbot companion disappears

On 13 October 2026 Character Technologies, the company behind the chatbot platform Character.AI, filed a voluntary Chapter 11 case in the US Bankruptcy Court for the District of Delaware. Bloomberg Law reports that Disney is the opening bidder, offering $20 million plus transition services for a non-exclusive, perpetual licence to certain company intellectual property and claims. Other buyers can bid higher. Reuters reports that court documents put the company's assets and liabilities at between $50 million and $100 million, and that a sale is expected to close in November or December.

The company says it will keep the platform running during the sale. Bloomberg Law reports that if the sale does not preserve the platform, it will be wound down. Reuters adds that the company also faces a lawsuit from the Kentucky Attorney General over chatbot safety.

Most coverage will treat this as a business story. For families and schools it is a different kind of question. Character.AI lets people hold ongoing conversations with chatbot characters. People who return to the same character every day can come to rely on it, and a service that may close gives them no say in what happens to those conversations or to the character itself. The reports so far do not say what will happen to stored chats if the platform is sold, changed or switched off.

Dan Fitzpatrick's reading is that the lesson reaches well beyond one company. Companion-style chatbots are products run by firms that can change their rules, be sold or fail, and users have no control over any of that. The same applies to any AI tool a school or employer builds habits around. Paralysis is still a bigger risk than adoption, and nobody should panic about children using chatbots. Curiosity over fear is the right starting point. But trust in a tool has to rest on something more durable than the continued existence of the company that runs it.

For school leaders and parents, the practical steps are these. Ask pupils, without judgement, which chatbot apps they use and how often, because most schools do not know. Add companion and character chatbots to your online safety and acceptable-use policies, with a named person responsible. Teach pupils that a chatbot is software owned by a company, and that what they write to it may be stored, sold or lost. Parents should check what their children have shared with these apps and find out how to delete an account and its data before any shutdown, not after. For businesses, the same test applies to any AI tool staff depend on: know what you would do if it vanished next month.

Dan Fitzpatrick works with school leaders and employers on how they adopt AI day to day, and writes and speaks on what it means for learning, work, children and trust.

Dan Fitzpatrick is available for interview and comment on this story. He is available today for live or pre-recorded radio, TV, podcast and print interviews, and has a broadcast-quality remote setup for live or pre-recorded down-the-line interviews. Contact: dan@theaieducator.io