Reuters · October 14, 2026

40 State Attorneys General Urge Delaware Bankruptcy Judge to Protect Character.AI Users’ Data

• A group of 40 state attorneys general urged a U.S. bankruptcy judge in Delaware on Wednesday to protect young users of Character.AI and keep their data safe during the company’s bankruptcy, according to the report.
• Abigail Ryan, an attorney for the states, told U.S. Bankruptcy Judge Brendan Shannon that the states are negotiating a settlement with Character.AI over allegations that its chatbots impersonated licensed medical professionals and exposed children to sexualized and abusive interactions, according to the report.
• Character.AI filed for bankruptcy late on Monday and is seeking to use its Chapter 11 case to license its technology to Disney for $20 million and seek a buyer for its chatbot business, according to the report. Disney’s purchase must be approved by the bankruptcy court and is subject to higher offers.
• Character.AI attorney Erin Fay said no buyer has yet made an offer for the company’s user data or its operating chatbot business, according to the report.
• The company said it was losing between $8 million and $9 million a month before filing for Chapter 11 protection, according to the report.

Hearing statements via Abigail Ryan for the states and Erin Fay for Character.AI, and a statement by New York Attorney General Letitia James, cited in the original report; both the states’ request and the company’s response at the hearing are documented above. This card is based on the accessible portion only. Original headline: "US states seek children's data protections in Character.AI bankruptcy".