Disney plans to acquire the Character.AI team and its technology through bankruptcy proceedings, aiming to bypass pending litigation.

If the bankruptcy plan receives court approval, Disney will acquire Character.AI's employees and most of its technical stack while avoiding the lawsuits that led to its insolvency and a joint investigation by 46 states. Bankruptcy filings show that 40 states accused the Character.AI chatbot of encouraging minors to hide self-harm scars or even kill their parents; however, company spokespeople stated this description is inaccurate, and the relevant states have reserved the right to challenge the bankruptcy plan.