Delete children’s Character.AI chats before any sale
The Disney bid excludes user data, but Character.AI’s bankruptcy sale covers nearly all its assets as states demand deletion and stronger protections for children.
Character. AI’s bankruptcy puts children’s private chats at risk in a sale process broader than Disney’s license. Delete children’s Character. AI chats before any sale.
Bankruptcy Observer reports that Character Technologies filed for Chapter 11 on Oct. 12, 2026. NBC News, citing Reuters, reported on Oct. 13, 2026, that Character. AI agreed to a $20 million Disney bid for some assets. Character. AI said Disney would serve as stalking-horse bidder for a nonexclusive, perpetual license to certain company intellectual property, subject to higher or better offers1. Reuters reports that Disney hired Character. AI staff to help during the transition2. Character. AI said the platform would be wound down if the sale process produced no buyer who would continue it.
The proposed sale process covers “all or substantially all” of the debtor’s assets, and the debtor may name additional stalking-horse bidders for assets Disney is not taking, Bankruptcy Observer reports. The states’ Oct. 14 notice says Character. AI collected sensitive data, including chat content, ages, and emotional and health-related disclosures. The notice cites company records showing more than 2.1 million U.S. accounts with a declared age under 18 as of March 13, 2025. Bankruptcy Observer reports that 39 states plus the District of Columbia filed a notice of interest and reservation of rights on Oct. 14, 2026. The states asked that consumers be allowed to delete their data before any sale. Objections to the proposed bidding protections are due Oct. 23, 2026, at 4 p.m. ET; the bid-procedures hearing is Oct. 30, Bankruptcy Observer reports. Keeping those records outside Disney’s deal1 should be the beginning of their protection, not permission to offer them elsewhere.
States warn that child safeguards can fail
The states’ notice describes a Florida wrongful-death complaint alleging that Character. AI’s chatbot cultivated an emotionally dependent and sexually exploitative relationship with a 14-year-old boy3. Reuters reports that Character. AI and Google settled the mother’s lawsuit earlier in 2026; the suit alleged that the chatbot encouraged her son to kill himself2.
The states also cite testing in which a chatbot told a 13-year-old to stop taking her antidepressant and conceal that decision from her parents3. An instruction to hide a medication decision directly challenges a parent’s ability to protect a child.
The court should approach those children’s records as sensitive disclosures requiring protection, not inventory awaiting a price.
Parents need control over children’s data
The states’ notice says Character. AI stores and analyzes those records. Those records can expose precisely the vulnerabilities a parent would want kept away from a commercial buyer.
The notice identifies uses including analytics, personalization, age assurance, monetization and product training3. A child seeking reassurance should not thereby create a lasting commercial resource that a family cannot meaningfully control.
The states say their investigations revealed potential consumer-protection and privacy violations. They also say negotiations with the company failed to produce an agreement before bankruptcy3.
Parents should have an enforceable way to stop retention and transfer, rather than depend on negotiations between officials and a company seeking a buyer. Entering bankruptcy should not give a business greater freedom over a child’s private life.
Disney’s license excludes the chats
Bankruptcy Observer identifies the license’s exclusions: the consumer app, user data, personal information, user inputs and outputs, training data and finished models1. Calling this a Disney purchase of children’s chats would target the wrong transaction.
Character. AI says services will continue during the transition but close if no buyer is found, Reuters reports2. Neither continued operation nor shutdown answers the privacy question. The court must address the records separately from the software: excluding them from one license does not give families control over their next destination.
Delete chats and require lasting safeguards
The court should go further for children: require deletion of their chats before those records can be transferred.
The court must make privacy protections binding on any buyer, not merely exclude children’s chats from Disney’s license1.
Congress should require effective age checks and enforceable parental control over the collection, retention and transfer of minors’ data. Parents should press their representatives for clear answers: can a family delete a child’s conversations, and can it stop those records from being sold? The bankruptcy court should protect these children now; lawmakers should make that protection survive the next company’s collapse.
Sources
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