Character.AI files for bankruptcy: how will user data be handled?

Now that Character.AI is going bankrupt, what happens to all of its users’ data?

Character.AI has filed for Chapter 11 bankruptcy protection and is selling some assets to Disney. Forty bipartisan state attorneys general want the asset transfer to protect users' sensitive data. New York Attorney General Letitia James said multiple states have investigated the company's consumer protection and privacy practices since 2024, and the two sides reached no agreement before the filing. The states want a judge to order the buyer to run effective age verification, limit minors' interactions with chatbots, add crisis safeguards, and let users delete their data.

Why it matters: Forty state attorneys general are demanding data protection conditions on Character.AI's bankruptcy asset sale, since sensitive user conversations and minors' safety are at stake in the transfer.