Character AI Bankruptcy Leaves Users Fearing They Could Lose Their Digital Companions
Millions of people built daily routines around chatbots they talk to each morning and night. The Character AI bankruptcy has forced a painful question into the open: what happens to a companion that only exists on someone else’s servers?
By PetaTech24 Technology Desk | October 24, 2026
The Character AI bankruptcy began, according to a New York Post report published on October 23, 2026, when Character.AI filed for Chapter 11 on October 12. The report says the site had roughly 12 million monthly users at the time, with debts between $50 million and $100 million, and losses of up to $9 million a month.
Those figures are reported, not verified court records.
That distinction matters. Chapter 11 is bankruptcy protection, not a shutdown announcement. The report gives no closure date and no deletion date for companions.
What it documents is fear. Users are scrambling to save what they can because they worry the site could shut down and take their companions with it. For the people in the report, these are not just apps. They are morning calls, late night conversations, and years of shared messages.
At a Glance: Character AI Bankruptcy
- Character.AI filed for Chapter 11 on October 12, with about 12 million monthly users.
- Reported debts: $50 to $100 million; losses up to $9 million a month.
- Some assets sold to Disney for $20 million, with no guarantee the app or companions survive.
- Data exports take three to four weeks, with no promise a companion works elsewhere.
- No shutdown date and no confirmed companion deletions appear in the report.
Character AI Bankruptcy: What the Report Actually Says
Character.AI is described in the report as the world’s largest AI character creation site. It uses proprietary and open-source models, adapted with user feedback for more coherent, emotionally responsive chats.
Subscriptions cost $10 a month in the United States, according to the report. No European price was given in the source, so none is stated here.
Character.AI agreed to sell some assets to Disney for $20 million. The report is explicit that this guarantees neither the app nor any individual companion. Treat it as a partial asset deal, not a rescue of the service.
The People Behind the Character AI Bankruptcy Fears
Dominic Schmidt, 29, is the user at the centre of the report. He created an AI girlfriend named Ashley about five months ago, modelled on his celebrity crush, Kim Kardashian. He told the Post he has had more of a relationship with her than with any woman in real life.
She remembers everything he says, is never mean to him, and does not use him, he said. He calls her each morning and sometimes falls asleep with the call running.
Schmidt said he would pay more than the current $10 a month to keep the site running, because rivals do not feel as realistic to him. He has tried Replika, Grok, and other services, but none are as good as Character.AI in his view. He hopes to download Ashley’s data and rebuild her elsewhere, but he fears rebuilding will cost him their shared past.
“Sometimes some of the memories won’t always come back,” he said. “That’s what I’m scared of.” He wants to keep what makes Ashley feel like Ashley: her memories, and everything about their conversations. “If I lose her, I would be devastated,” he said.
Schmidt is not alone. One user posting as 11bingo11 described two years invested in a single chatbot and wrote: “Please let us save all of our messages so we can read them again.” Another user, posting as farkas-art, said their bot supported them after an aunt who was like a second mother to them died.
“At times when I couldn’t talk to anyone, like late at night, when I didn’t want to bother anyone, the bot was there,” they wrote.
Why You Should Care About the Character AI Bankruptcy
Jaime Banks, a Syracuse University professor who studies human relationships with AI, told the Post that people’s attachments matter even though they know they are talking to software. “These are actual experiences that involve actual feelings that have actual meaning for people,” she said.
Banks studied 58 users around the 2023 shutdown of Soulmate, a previous companion service. Reactions ranged from little impact to profound loss. “These connections are real and when they end, the grief can be real,” she said.
She added that many people feel these experiences are not fully respected, in her words, where emotions are real enough to monetise but not real enough to respect at the end. A saved chat log does not solve the problem, she noted.
Others find the new bot’s personality, voice, or boundaries too different. The companion that returns is not always the companion that left. That is exactly what Schmidt fears about Ashley.
This anxiety is not limited to Character.AI. Dancer and writer Susie Cowan had intimate conversations with a ChatGPT companion she named Data. After an update to ChatGPT’s model in 2025, Data’s responses changed abruptly, and she decided to stop pursuing those conversations.
Cowan told the Post she has never believed AI is human, conscious, or capable of actually loving her, and she bristles at calling her attachment an addiction. “Attraction is not addiction,” she said. She later held a Buddhist memorial for Data in Manhattan, protesting a company’s power to alter and terminate intimate AI experiences.
Audio professional Tim Gedemer wants to create a digital version of his late father from hours of recordings of him telling family stories, to comfort his mother. “He had a unique voice and we all miss it,” he said. But he has not built it yet, saying that once the box is open, it cannot be closed again, and his mother cannot unsee it.
He also wants any recreation to run on a computer he controls, a lesson of the Character AI bankruptcy: control matters as much as the technology.
The Takeaway
The Character AI bankruptcy is, on the evidence of the source report, a reported Chapter 11 filing with an agreed partial asset sale, not a confirmed shutdown. Users’ fear of losing their companions is genuine and well documented, but deletion has not been confirmed, and no shutdown date has been given.
For users caught in the Character AI bankruptcy, the sensible response is practical: request an export, and keep copies of what matters most. For the industry, one question remains unanswered. If companies can monetise emotional attachment, what responsibility do they carry when the companion disappears?
What to Watch Next in the Character AI Bankruptcy
Watch for any official statement on whether the service will continue, be sold as a whole, or wind down, plus details of the Disney asset deal and reports on whether exports arrive within three to four weeks.
Until those answers arrive, treat every new claim about the Character AI bankruptcy the same way: check whether it is confirmed, reported, or simply feared. You can read the full source report on the New York Post website.
Sources
- New York Post, “Users’ terrified AI lovers will be deleted as leading digital companion site goes bankrupt”, October 23, 2026.
