Character AI is a chat platform where people talk with AI characters that the company or other users create, and its owner, Character Technologies, announced on October 12, 2026 a voluntary Chapter 11 bankruptcy process to run a court-supervised sale. The company says the service stays online during the process, and that it expects the sale to finish by the end of November or early December 2026. If no bid keeps the platform running, it will be wound down.
Key takeaways
- Character AI was founded in 2021 by Noam Shazeer and Daniel De Freitas, and describes itself as a platform for interactive entertainment.
- Open-ended chat for users under 18 was removed in the United States starting November 24, 2025, after a two-hour and then one-hour daily cap.
- The Federal Trade Commission ordered seven companies, including Character Technologies, to describe how their companion chatbots affect children on September 11, 2025.
- Disney agreed to pay USD 20 million for a nonexclusive, perpetual license to some Character AI intellectual property, as the first bidder in the sale.
- Users can delete an account or export data from the app or website while the sale is pending.
What the platform does
On its about page, Character AI says millions of people visit every month and that millions of Characters are available to discover. A Character is a chat persona with its own name, personality, and backstory. Users can talk with ones made by others or build their own, and the conversations run on the company's language models. The company places the product in entertainment (storytelling, games, and social connection) rather than in search or productivity.
The company was founded in 2021 by Noam Shazeer and Daniel De Freitas, according to a Google Cloud press release from May 10, 2023. Its September 28, 2026 blog post announced a new default chat style called PipSqueak 3 and a paid tier, lite, priced at USD 4.99 a month or USD 2.49 a week, with prices varying by region. The same post says the free plan keeps unlimited messaging.
Teen restrictions, step by step
On October 29, 2025, the company announced that open-ended chat with AI would no longer be available to users under 18. Until the change took effect, teens could chat for two hours a day, a limit that was later reduced to one hour. A November 21, 2025 update said removal would begin in the United States on Monday, November 24, in stages, with a second group of users following weeks later. Teens keep access to non-chat features such as a feed, image generation, avatars, and streams.
To tell age groups apart, Character AI built its own age assurance model and combined it with third-party tools including Persona. It also pledged to fund an independent nonprofit, the AI Safety Lab, for safety research on AI entertainment. The November update describes the removal for US users and says the age-assurance rollout continues globally, so readers in Canada should check current in-app terms rather than assume identical treatment.
Regulators and courts
Scrutiny of companion chatbots grew through 2025 and 2026. The table lists the main public events found in primary or news sources.
| Date | Event | Detail |
|---|---|---|
| September 11, 2025 | FTC 6(b) orders | Seven companies, among them Alphabet, Character Technologies, Meta, OpenAI, and Snap, were asked how chatbots are monetized, tested, and monitored, especially for children |
| October 13, 2025 | California SB 243 signed | Per the governor's office, companion chatbot operators must disclose that replies are AI-generated and keep protocols for suicidal ideation and self-harm; minors get break reminders |
| October 29, 2025 | Under-18 chat change announced | Company statement on ending open-ended chat for teens |
| January 2026 | Settlement in principle | Character AI, its founders, and Google told a Florida federal court they had reached a mediated settlement; terms were not disclosed |
| October 12, 2026 | Chapter 11 announced | Court-supervised sale process begins |
The FTC announcement explains that 6(b) authority lets the agency run wide-ranging studies without a specific law enforcement purpose, so the orders were not accusations against any company. Kentucky and Pennsylvania also sued the company in 2026, according to CBS News and NBC News, and those cases are allegations, not findings.
What happens to users during the sale
According to the company's October 12, 2026 post, paid subscriptions remain active with unchanged billing, and subscribers will be told in advance if paid features change. The privacy policy and security practices are described as unchanged. CBS News noted that the policy allows data to be disclosed in connection with a sale, which is a standard term in many services. Anyone who wants to leave can delete an account or export data from the app or website.
Disney is the stalking-horse bidder, meaning other buyers can still offer more. News coverage reported on October 18, 2026 that Disney agreed to make offers to at least 60 employees. None of the reports reviewed say whether the app itself would pass to Disney.
This article is general information, not medical or legal advice. Chatbot conversations are not a substitute for professional support. In Canada, the 9-8-8 Suicide Crisis Helpline is reachable by call or text at any hour, and in the United States the 988 Lifeline offers call, text, and chat.
FAQ
Is Character AI shutting down?
Not yet. The company says the platform remains up and running during the Chapter 11 process. It also says the platform will be wound down if no sale proposal keeps it operating.
Can teenagers still chat with characters?
Not in open-ended conversations in the United States, where removal began November 24, 2025. Teens can use creative features such as videos, stories, and streams.
Who founded Character AI?
Noam Shazeer and Daniel De Freitas founded it in 2021. Both joined Google DeepMind under an agreement announced August 2, 2024.
Is Character AI free?
A free plan exists with unlimited messaging, and the company sells paid tiers. The newest, lite, was announced at USD 4.99 a month.
Related reading
- Whether Character AI conversations are monitored
- Character AI and Google: the deals and lawsuits
- The Character AI beta app
- How conversational interfaces developed
More in AI Blog.
Last verified: October 2026
Sources
- Character AI and Google Cloud Partner to Build the Next Generation of Conversational AI, Google Cloud press release, May 10, 2023
- About Character AI, Character AI, 2026
- Taking Bold Steps to Keep Teen Users Safe on Character AI, Character AI blog, October 29, 2025
- Update on changes to the under-18 experience, Character AI blog, November 21, 2025
- Introducing PipSqueak 3, ShortSqueak, and lite, Character AI blog, September 28, 2026
- An Update on Character AI, Character AI blog, October 12, 2026
- FTC Launches Inquiry into AI Chatbots Acting as Companions, Federal Trade Commission, September 11, 2025
- Governor Newsom signs bills to further strengthen California's leadership in protecting children online, Office of the Governor of California, October 13, 2025
- Google and Character AI agree to settle lawsuit over teen suicide, January 8, 2026
- Character AI files for bankruptcy, CBS News, October 13, 2026
- Character AI files for bankruptcy, will sell some assets to Disney for $20 million, NBC News, October 2026
- Disney agrees to hire the majority of Character AI's workforce, October 18, 2026
- 9-8-8 Suicide Crisis Helpline, Canada, 2026; 988 Suicide and Crisis Lifeline, United States, 2026