Disney has agreed to make job offers to most of the people who work at Character.AI, the chatbot startup that went into Chapter 11 bankruptcy this week. TechCrunch reported on 18 October that a legal filing spotted by Bloomberg shows Disney agreeing to make employment offers to at least 60 Character.AI employees, which TechCrunch describes as the majority of the workforce, at an estimated $60 million in annual compensation.

What the filing says about the staff

Business Insider reported on 16 October that Disney plans to pay $60 million per year to 66 Character.AI workers, according to a Chapter 11 filing. The same filing, it says, sets aside a further $30 million for an "aggregate retention pool" to keep the employees in place. It says Disney expects to spend $180 million on "total compensation and retention" for them over the next three years.

Of the 66 offered jobs, Business Insider says 56 had already resigned from Character.AI, while the other 10 were waiting for the US government to update their work visas. TechCrunch, describing the filing, says the "vast majority" of employees who were offered jobs at Disney accepted them.

Entertainment lawyer Corey Martin of Granderson Des Rochers, who advises companies on media transactions and who, Business Insider says, did not work on the deal or with Disney, said the figures did not surprise him. "They're highly compensated employees. The numbers can be eye-popping, but it's not that unusual in this space," he said.

Business Insider also reports that Disney hired Character.AI's former chief executive, Karandeep Anand, as its first company-wide technology chief, and that, as of 16 October, Disney had not disclosed his pay. It adds that the Character.AI hiring came two weeks after Disney laid off several hundred workers, including some tech employees.

The bankruptcy sale

Character Technologies Inc., which operates Character.ai, said it had commenced a voluntary Chapter 11 case in the US Bankruptcy Court for the District of Delaware. Its aim is a sale of all or substantially all of its assets, and it said it intends to keep running its platform meanwhile. CNBC reported that the company filed on Monday; Character.ai's press release is datelined 13 October 2026.

Before filing, the company said, it agreed with Disney Worldwide Services, Inc. that Disney would act as the stalking-horse bidder. That is the opening offer in a bankruptcy sale, which other bidders can beat. The offer is for a non-exclusive perpetual licence to "certain Company intellectual property and certain Company claims", in exchange for $20 million. The agreement also covers Disney providing transition services using former Character.ai employees it has hired. The company said the transaction is subject to higher or better offers under section 363 of the Bankruptcy Code.

Business Insider says other companies can submit competing bids by 20 November. Character.ai said it anticipates the sale will complete in late November or early December 2026. If the sale does not produce a purchase that continues the platform, the company said, "the platform will be wound down". The Law Commentary site reports that the filing lists estimated assets and liabilities of between $50 million and $100 million.

On the filing's figures, the sums set aside for people are larger than the $20 million for the licence. The pay and retention money is not part of the $20 million price.

Why the company says it is selling

Chief executive Colin Adams said in the company's statement: "Over the past year, Character.ai has taken meaningful steps to sustain and improve its business in the face of significant legal, regulatory, and operational headwinds." The board, he said, decided a court-supervised sale offered the best chance to maximise value for stakeholders.

TechCrunch says the filing describes a "large and engaged user base" but says Character.AI has been hobbled by high costs and "potential litigation-related liabilities and regulatory engagement". TechCrunch notes that the company was sued by the mother of a 14-year-old boy who said her son became obsessed with one of its chatbots before he died by suicide, and that it also faces government investigations over child safety concerns. The Los Angeles Times reports that Character.AI and Google agreed earlier this year to settle several lawsuits brought by families in multiple states. CNBC reports that Kentucky sued the company in January.

Character.AI's relationship with Disney has changed sharply since September 2025, when Disney sent Character.AI a cease-and-desist letter over unauthorized chatbots based on characters such as Elsa, Moana and Darth Vader, Law Commentary reports; the Los Angeles Times reports that Character.AI then removed chatbots impersonating popular Disney characters such as Elsa and Darth Vader.

Sources

Character Technologies Inc. (2026) 'Character.ai Initiates Voluntary Chapter 11 Proceeding to Facilitate Value-Maximizing Sale Process', Business Wire, 13 October 2026, available at: https://finance.yahoo.com/technology/ai/articles/character-ai-initiates-voluntary-chapter-035000862.html (Accessed: 18 October 2026).

CNBC (2026) 'AI companion startup Character.ai files for Chapter 11 bankruptcy, citing costs and litigation', CNBC, 13 October 2026, available at: https://www.cnbc.com/2026/10/13/character-ai-chapter-11-disney-bid.html (Accessed: 18 October 2026).

Faris, J. (2026) 'Disney agreed to pay $60 million to 66 employees from an AI startup that filed for bankruptcy, weeks after tech layoffs', Business Insider, 16 October 2026, available at: https://www.businessinsider.com/disney-pays-60-million-characterai-employees-tech-layoffs-karandeep-anand-2026-10 (Accessed: 18 October 2026).

Ha, A. (2026) 'Disney agrees to hire the majority of Character.AI's workforce', TechCrunch, 18 October 2026, available at: https://techcrunch.com/2026/10/18/disney-agrees-to-hire-the-majority-of-character-ais-workforce/ (Accessed: 18 October 2026).

Lozano, X. (2026) 'Character.AI Files for Bankruptcy as Disney Bids $20 Million and Platform Faces Possible Shutdown', Law Commentary, 13 October 2026, available at: https://www.lawcommentary.com/articles/character-ai-bankruptcy-disney-bid-platform-shutdown (Accessed: 18 October 2026).

Wong, Q. (2026) 'Disney strikes $20-million deal for Character.ai's assets as AI startup files for bankruptcy', Los Angeles Times (via Yahoo Finance), 13 October 2026, available at: (Accessed: 18 October 2026).

Picture credits

  • Top picture: The Casting Building at Walt Disney Studios in Burbank, California, in a Historic American Buildings Survey photograph. Photo: Tavo Olmos, Historic American Buildings Survey (HABS), Library of Congress / National Park Service — public domain (source)