Character.AI, the company behind a popular chatbot app, filed for bankruptcy on Monday, Variety and Ars Technica reported. It plans to sell its assets.

Disney has offered $20 million for "a non-exclusive perpetual license" to some of the company's technology, both outlets reported. Variety said Disney would be the "stalking-horse" bidder.

Disney hired Character.AI's former CEO, Karandeep Anand, as its first chief technology officer, both outlets reported. Variety said that hire came last month. Former Character.AI workers who joined Disney will help keep the app running during the sale, Variety reported.

Character.AI expects to finish the sale by late November or early December, Variety reported.

"After a comprehensive review of the available alternatives, the board determined that this court-supervised sale process provides the Company with the best opportunity to maximize value for all stakeholders," Character.AI CEO Colin Adams said, according to Variety.

The app lets users chat with made-up characters. It has faced criticism over characters it did not own and claims that it harmed kids, both outlets reported. Variety said the company settled several lawsuits over mental health harms in January.

The bid may be a surprise, Ars Technica reported. In September 2025, Disney sent Character.AI a cease-and-desist letter. It said the company's chatbots were "harmful and dangerous to children." Character.AI then removed Disney characters from its platform.

Disney did not respond to Ars Technica's question about whether it plans to use the technology in products for kids. It is possible Disney will be outbid, Ars Technica reported.

What we know: Character.AI is in bankruptcy, and Disney has bid $20 million for a license to some of its technology.
What we don't: Whether another buyer will top Disney's offer.