Character.AI is being sold in bankruptcy. What happens to people’s chats?

Character Technologies, the company behind the Character.AI chatbot app, is in bankruptcy and selling its assets. The US government’s bankruptcy watchdog says the people using the app share very personal things in their chats, and that the company’s privacy policy may let that data be sold. If you have used Character.AI, here’s where things stand and what you can do.

What happened

Character Technologies filed for Chapter 11 bankruptcy in October to sell all or most of its assets, Quartz reports, citing Bloomberg. Disney has offered $20 million as the opening bid for a license to some of its technology.

In an October 27 court filing, the US Trustee, the part of the Department of Justice that oversees bankruptcy cases, asked the court to appoint a consumer privacy ombudsman, an independent expert who would advise on what user data can be sold and on what terms. The Record reports that the filing says Character.AI has 12 million monthly active users and that conversations are often sensitive and sometimes involve minors.

The filing contrasts what the chatbot tells users with what the company’s policy says. Asked whether conversations are private, the chatbot answered that they wouldn’t be shared “without your explicit permission,” according to the filing. But the Trustee calls the privacy policy “ambiguous”: it says the company may disclose personal information and that it can be transferred if the company is sold. The policy was updated on July 1, while the company was trying to sell its assets.

At a hearing on Friday, October 30, Judge Brendan Shannon declined to order an ombudsman but urged the company to bring one on, Quartz reports. He approved the auction process. More than 30 states had asked that an ombudsman remain an option, and they can raise some objections again when the winning bidder asks the court to approve the sale. The company has said the app will be wound down if no buyer keeps it running.

What this means for you

Nothing has been sold yet, and the court still has to approve whatever deal comes out of the auction. But this case is a reminder of something that applies to every chatbot: a privacy policy usually allows your data to move with the company if it’s sold, and a friendly “your chats are private” from the bot itself isn’t a promise from the company.

What you can do

1. Decide what you want kept. If you no longer use Character.AI, look in the app’s settings for options to delete your chats or your account. If you want a copy of anything first, save it before you delete.
2. Use your privacy rights. Depending on where you live, privacy laws may let you ask a company what it holds about you and to delete it.
3. Talk with your kids about chatbots. If your children use companion chatbots, it’s worth explaining that what they type may be stored and isn’t a secret between them and the bot.
4. Share less with any chatbot. Leave out names, addresses, health details and anything you wouldn’t want a future owner of the company to have.

How Frame helps

Frame guides you through opting out of the data brokers and people-search sites that collect and resell personal information, one request at a time, and tracks each one so you can check it stuck. Frame never sells, rents or trades your personal information.

Sources

• The Record, DOJ raises privacy concerns over potential sale of Character.AI chats, October 30, 2026
• Quartz, Judge urges Character.AI to hire a privacy expert in its Disney bankruptcy deal, October 30, 2026