Prosecutors Seek Character.AI Data Protections in Bankruptcy Sale
A coalition of 40 U.S. state attorneys general is asking that Character.AI’s bankruptcy proceedings address users’ access to and deletion of their data, as well as limits on using private conversations.
Character.AI data protection has become an issue in the bankruptcy proceedings of Character Technologies, Inc. A coalition of 40 U.S. state attorneys general and the District of Columbia filed a notice of interest and reservation of rights on October 14, 2026, in the case filed under docket number 26-11603-BLS.
The attorneys general are asking that any sale or transfer of the business or assets take into account child protection, safety measures, and user privacy. Their filing is not itself a court decision and does not determine whether user data will be sold, to whom it might be transferred, or under what conditions.
Character.AI data protection before a potential transfer
The coalition explicitly requests that users be allowed to access their data and delete it before any sale. It also seeks limits on the commercial use of private conversations, including their use to train AI systems without valid consent.
According to the attorneys general, users may share sensitive personal, health, or emotional information in conversations. Whether and to what extent such data could become part of the transferred assets will therefore be addressed in the bankruptcy process.
It has not been confirmed that private conversations, voice-call recordings, or other personal data will be included among the assets ultimately transferred. It is likewise uncertain whether the court will grant the request for data export or deletion or impose restrictions on AI training.
Ongoing investigations are not a court verdict
The coalition says its ongoing investigations have uncovered possible violations of consumer-protection and privacy rules. However, this is not a final court finding that Character.AI violated those rules.
The filing also mentions the possibility of requesting the appointment of an independent privacy ombudsman. This possibility also does not yet represent an approved measure.
Neither Disney nor the scope of the sale is confirmed
Character Technologies, Inc. filed a voluntary petition for protection under Chapter 11 in the case filed under docket number 26-11603-BLS. The exact scope of the assets and liabilities in the final transaction has not yet been confirmed.
It has also not been confirmed that Disney will acquire the user database or take over the Character.AI platform itself. A potential buyer could face conditions concerning the usability of sensitive user data and additional protections for minors.
What comes next
- the court’s decision on sale procedures and provisions concerning personal data,
- potential requirements for access to, export, or deletion of user data,
- the attorneys general coalition’s next steps, including a possible objection to the sale or request for a privacy ombudsman,
- the final scope of assets and liabilities in an agreement with Disney or another buyer.
Sources
- Office of the New York Attorney General – Confirms that the coalition of 40 attorneys general intervened in the Character.AI bankruptcy and is seeking protection for consumers and their sensitive data.
- States’ Notice of Interest and Reservation of Rights, In re Character Technologies, Inc. – The primary court document details the requests for data access and deletion before the sale, limits on AI training without valid consent, and the possibility of requesting a privacy ombudsman.
- U.S. Department of Justice, Office of the United States Trustee – Confirms that Character Technologies, Inc. filed a voluntary petition for protection under Chapter 11 in case 26-11603-BLS.
Verified and updated: October 15, 2026 06:21
