Now that Character.AI is going bankrupt, what happens to all of its users’ data?

<figure> <img alt="Pixelated face with swirly eyes on a phone to represent a chatbot." data-caption="" data-portal-copyright="Image: Cath Virginia / The Verge, Getty Images" data-has-syndication-rights="1" src="https://platform.theverge.com/wp-content/uploads/sites/2/2026/09/STK414_7_AI_CVIRGINIA_A.png?quality=90&#038;strip=all&#038;crop=0,0,100,100" /> <figcaption> </figcaption> </figure> <p class="wp-block-paragraph">New York Attorney General Letitia James <a href="https://ag.ny.gov/press-release/2026/attorney-general-james-urges-court-protect-children-and-consumers-characterai">revealed</a> a years-long multi-state investigation against Character.AI as they now seek to require protections on consumer data sold through its bankruptcy proceeding.</p> <p class="wp-block-paragraph">James is among 40 bipartisan AGs who <a href="https://ag.ny.gov/sites/default/files/court-filings/alaska-et-al-v-characters-technologies-inc-notice-of-interest-2026.pdf">filed a notice of interest</a> in Character.AI's bankruptcy case "to put all parties on notice of the regulatory issues that will need to be addressed in any sale or transfer of the Debtor's business or assets." Character.AI announced Tuesday it was <a href="https://www.theverge.com/ai-artificial-intelligence/1009802/character-ai-files-for-bankruptcy-disney">filing for Chapter 11</a> and selling some assets to Disney. But the AGs warn there could be serious risk involved in the transfer of the technology due to the "hi …</p> <p><a href="https://www.theverge.com/policy/1011417/new-york-ag-characterai-bankruptcy">Read the full story at The Verge.</a></p>