What happened
Character Technologies, Inc., the debtor behind Character.AI, filed a notice in the United States Bankruptcy Court for the District of Delaware on October 27, 2026. The notice attaches a revised proposed bidding-procedures order for the company’s Chapter 11 asset-sale process. The case is No. 26-11603 (BLS).
The original motion, filed October 13, asked the court to approve procedures for a sale, licence, or other disposition of all or substantially all of the debtor’s assets, or subsets of those assets. It also sought approval for Disney Worldwide Services, Inc. to act as stalking-horse purchaser for the defined Disney target assets. A stalking horse is an initial bidder whose agreement establishes a floor for later bids, subject to a court-supervised sale process.
The proposed order describes bid protections for Disney that include a break-up fee and expense reimbursement together totaling $700,000. It also contemplates the possible designation of additional stalking-horse purchasers for assets or asset subsets. The sale process would cover procedures around bids, notice, and the potential assumption and assignment of certain executory contracts and unexpired leases.
The notice says that the Coalition of States and the Office of the United States Trustee for the District of Delaware filed objections to the proposed order. It also says that one party in interest and the U.S. Trustee made informal comments. Character Technologies states that the revised form contains modifications and revisions intended, among other things, to address those objections. The filing attaches both the revised order and a blackline comparison against the earlier version, but the notice itself does not identify each substantive change.
A hearing to consider approval of the motion is scheduled for October 30, 2026, at 10:00 a.m. Eastern Time. Objections were originally due October 23; the debtor extended the U.S. Trustee’s deadline to October 27 at 5:00 p.m. Eastern Time. The debtor says it will present the revised proposed order at the hearing and reserves the right to make further changes before then. The public filing is available from the Delaware bankruptcy case docket.
What the archive adds
This is a new fact in a known story. Earlier coverage reported that New York’s attorney general urged protections for children and consumers in the Character.AI bankruptcy and that Disney had agreed to acquire certain assets for $20 million and receive a perpetual non-exclusive technology licence. The revised order confirms that objections are now affecting the proposed sale mechanics.
Trend signal
No supplied pattern genuinely fits this procedural filing. It concerns a court-supervised asset sale, not a demonstrated change in agent architecture, interoperability, economics, or deployment practice.
Why now
The timing follows the objection process for the original bidding order. The filing says Character Technologies revised the order after objections from state authorities and the U.S. Trustee, ahead of the October 30 hearing at which the court will consider the sale procedures.
Connections to other events
The filing connects directly to the earlier Character.AI bankruptcy coverage: the proposed Disney transaction is not simply a commercial agreement but part of a court-controlled process. The earlier concern about protecting children and consumers is relevant because the revised order was expressly submitted after state objections, although this notice does not specify whether or how those concerns were resolved.
Why it matters
For teams building consumer AI products, the filing is a reminder that a platform’s assets are broader than code and model infrastructure. In a distressed sale, contracts, licences, and potentially sensitive operational systems can become subjects of bidding procedures, judicial review, and regulatory objections. That can affect continuity for users, partners, and developers who depend on the platform.
The immediate lesson is not that the sale has changed hands or that any particular data practice has been approved. Rather, the sale terms remain under review. Builders integrating with consumer AI platforms should distinguish an announced asset agreement from a completed transaction, and should treat the platform’s legal, contractual, and governance status as an operational dependency.
What happens next
- The court will consider the revised bidding procedures. (3 months, 85%). Watch for: an order or hearing outcome following October 30, 2026.
- The debtor may further amend the proposed procedures before approval. (3 months, 55%). Watch for: a new filing, revised redline, or additional objection.
Limits and uncertainty
This notice establishes that a revised proposed order was filed; it does not establish that the court approved it. It also does not enumerate the changes made in response to objections, explain the Coalition of States’ specific concerns, or state whether the U.S. Trustee supports the revised version. The $700,000 figure appears in the proposed order as requested bid protection, not as a court-approved payment. Nothing in this filing confirms a completed sale, an asset transfer, or a final disposition of user data, contracts, or licences.
Reader takeaway
Character.AI’s proposed bankruptcy sale procedures have been revised after government and trustee objections. The key development is procedural rather than product-related: Disney remains identified as stalking horse for defined assets, but the rules governing the sale are still subject to court review and may change before approval.
Open question
Which revisions, if any, directly address state and trustee concerns about consumer protections, contracts, or the handling of sensitive platform assets?