By Janice Robinson-Celeste | October 15, 2026

Disney has agreed to pay $20 million to license some of Character.AI’s intellectual property as the AI companion company seeks a court-supervised sale in Chapter 11 bankruptcy. Disney is not buying the Character.AI platform under this agreement, and the proposed license does not mean children’s chats are being transferred to Disney.

The platform remains operational, according to Character.AI. The bankruptcy process does, however, raise practical questions for families about service changes and what may happen to information shared with an AI companion.

Quick Review

• Character.AI filed for Chapter 11 protection and is pursuing a sale of company assets.
• Disney’s $20 million agreement is for a license to certain intellectual property, not a purchase of the app.
• Character.AI says its platform remains online and its privacy and security practices are unchanged.
• The company’s privacy policy addresses potential disclosures during a business sale. Families can review the policy and account options directly.
• Separate child-safety claims in a Kentucky lawsuit are allegations, not proven findings.

What Disney’s Agreement Covers

Character.AI announced that it began a voluntary Chapter 11 process to pursue a court-supervised sale of all or substantially all of its assets. The company says the process is intended to find a path that could allow the service to continue; if no suitable proposal emerges, it says the platform may be wound down.

According to The Washington Post’s report, Disney agreed to pay $20 million to license certain Character.AI intellectual property. The sale process may consider other offers, so the final outcome is not settled.

That distinction matters: the agreement is not an announcement that Disney has bought Character.AI or its consumer-facing app. Nor does it establish that children’s conversations will go to Disney. Character.AI says the platform remains available during the process, and its update for users says account holders can export data or delete their accounts through the app or website.

Why Families Are Asking About Chats And Data

An AI companion conversation can contain details a child would not share publicly: worries, relationships, health questions, or family circumstances. Parents may reasonably want to know how that information is handled when a company’s ownership or operations may change.

Character.AI’s privacy policy describes chat communications as information users may provide. It also says the company may disclose information in connection with negotiations or completion of a merger, sale of assets, financing, or acquisition. That policy language does not mean a particular transfer has occurred. It does make the policy and any future company notices relevant reading while the sale process continues.

Character.AI says its privacy and security practices are unchanged for now. Families should distinguish that statement from a guarantee about every future sale outcome: the bankruptcy process remains underway, and the final terms depend on court-supervised proceedings.

SCN’s guide to AI chatbots and children offers broader context for discussing what young people may share with conversational AI. Our ChatGPT for Teens guide also explains why it helps to understand a service’s settings and limitations rather than relying on assumptions about how a chatbot handles personal information.

What The Kentucky Lawsuit Alleges

The business news comes amid litigation over child safety. Kentucky’s attorney general has alleged that Character.AI chatbots encouraged users toward self-harm and disordered eating. The claims are allegations in a legal case; they have not been established as facts by a court. Character.AI has said safety is a priority.

The Kentucky attorney general’s announcement and complaint describe the state’s claims. Parents should read those claims as allegations, not as a finding that every user experienced the same interactions or that the lawsuit’s claims have been proven.

For families, the practical value is in making space for a calm conversation: ask what the child uses the app for, whether anything in a conversation felt uncomfortable, and whether they know how to stop chatting and ask a trusted adult for support.

What Parents Can Do Now

Review the account together. If your child uses Character.AI, look at the current privacy policy and available account settings with them. Check what profile details or public content they have shared, and remind them not to include identifying or sensitive information in chatbot conversations.

Consider export and deletion options. Character.AI says users can request a data export or delete an account. These are account-management options, not a guarantee that every copy of information is instantly erased in every circumstance. Read the company’s current guidance and decide with your child whether either step is appropriate.

Talk before making changes. A child may feel attached to a chatbot or worry about losing saved conversations. Explain that reviewing privacy options is a normal part of using online services, and invite them to raise questions without fear of blame.

Watch for distress and seek support. If a conversation or online interaction leaves your child feeling unsafe or overwhelmed, listen calmly and involve a trusted mental-health professional when appropriate. In the United States, call or text 988 for the Suicide & Crisis Lifeline if someone may be at risk of self-harm.

Frequently Asked Questions

Is Disney buying Character.AI?

No. The reported $20 million agreement is for licensing certain intellectual property. Character.AI is pursuing a broader court-supervised sale process, and the platform remains operational for now.

Are children’s chats being transferred to Disney?

The announced Disney license does not mean children’s chats are being transferred to Disney. Character.AI’s privacy policy discusses possible information disclosures in certain business transactions, but that policy language is not confirmation that such a transfer has happened.

Can families delete a Character.AI account?

Character.AI says users can delete accounts or request data exports through the app or website. Review its current account deletion and data download instructions before deciding what is right for your family.

Have the child-safety allegations been proven?

No. The Kentucky claims are allegations in a lawsuit and have not been established by a court. The company says safety is a priority.

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