Character Technologies Inc., the company behind Character.ai, told the US Bankruptcy Court for the District of Delaware today that 66 of the 86 full-time employees it had at the end of September have accepted jobs at Disney, leaving 18 on the payroll and only 8 expected to stay through the case. Three motions filed today also put advertising revenue on the court record for the first time in the proceedings: according to the company's cash management motion, advertising partners pay Character.ai by ACH wire into a single Silicon Valley Bank operating account.

In Short

Character.ai, the AI chatbot app that filed for bankruptcy on Monday, has lost most of its staff to Disney, the company lined up to buy a license to some of its technology, and now has 18 employees left, 6 of them on the team that keeps the platform safe. The new court papers show where its money comes from: subscription payments through Stripe, purchases through the Google and Apple app stores, insurance repayments for legal settlements, and advertising partners who send money to its main bank account. The company has about $59.4 million in the bank, has walked away from a New York office it rented from WeWork, and says it will probably shut down operations after a sale.

Three more first-day motions

The new documents are docket numbers 9, 10 and 11 in case 26-11603, each marked as filed on October 13, 2026, one day after the Chapter 11 petition. Document 9, 38 pages including its exhibits, asks for authority to keep the existing cash management system, honor bank fees and keep using pre-printed business forms, and seeks extra time to comply with section 345(b) of the Bankruptcy Code. Document 10, 50 pages, asks for permission to pay prepetition wages, benefits and other employee obligations and to keep the benefit programs running. Document 11, an 11-page motion with a five-page proposed order attached as Document 11-1, asks to reject the company's New York office agreement and abandon whatever furniture and supplies remain there.

All three are signed by Erin R. Fay, Shane M. Reil and Heather P. Lambert of Wilson Sonsini Goodrich & Rosati in Wilmington, as proposed counsel to the debtor. All three rely on the Declaration of Colin M. Adams in Support of the Debtor's Chapter 11 Petition and First Day Motions. That declaration was not among the documents reviewed for this article, although the wages motion cites specific paragraphs of an "Ex. A" to it (paragraphs 102, 103 and 107 to 109), which suggests the declaration carries a detailed exhibit on the workforce.

Like the first batch of motions, these are early drafts in visible ways. Judge initials are missing from the case number, and the hearing dates and objection deadlines in the proposed interim orders are blank. Each motion repeats the same background paragraph: a "first in kind" AI entertainment platform with a "4-year lifespan as an active platform," whose development costs, "coupled with potential litigation related liabilities and regulatory engagement," left it unable to generate enough cash flow "to support its business in the present form."

Where the money comes from

The cash management motion is the first document in the case to describe Character.ai's revenue streams, and it does so in a single paragraph. According to the company, it collects money primarily through two accounts at Silicon Valley Bank, now a division of First Citizens Bank & Trust Company.

The Receipts Account (ending 6978) "receives funds from Stripe, Inc. for revenue generated from subscriptions to the Debtor's online platform." It held about $5,441,000 on the petition date and periodically transfers money to the main operating account.

The Main Operating Account (ending 6963) "primarily receives funds from (i) application providers (e.g., the Google and Apple App Stores) for revenue from users purchasing and using the Debtor's application; (ii) advertising partners for advertising revenue via ACH wires; and (iii) insurance providers for reimbursements for certain legal settlements."

A schematic attached as Exhibit C draws the same picture. One arrow, labelled "Platform, ad & insurance receipts," runs into the operating account. A separate arrow, "Stripe receipts," runs into the receipts account.

That is the whole of what the documents say about advertising. There are no amounts, no names of ad partners and no breakdown between subscriptions, in-app purchases and advertising. PPC Land's first article on the case noted that none of the petition documents mentioned advertising, and that Character.ai's ads.txt file listed 44 authorized seller lines, including a direct Google account registered to Character Technologies Inc. The cash management motion now confirms, under the company's own description to a federal court, that advertising revenue exists and arrives by ACH the US bank transfer network.

Two payment paths for paying users

The split between Stripe and the app stores is also a business detail with consequences. Subscriptions bought on the web are processed by Stripe and land in one account. Purchases made inside the iOS and Android apps are paid out by Apple and Google, after their commissions, into another. The motion does not give the share of each.

The distinction has been moving across the subscription economy. RevenueCat's 2026 report, covered by PPC Land in March, found that AI apps earn a median $30.16 per payer in the first year against $21.37 for other apps, but retain subscribers worse, and that 41% of the highest-earning apps took some revenue through web channels. In the EU, Apple replaced its per-install fee with a 5% commission on non-App Store sales from October 1, 2026, while keeping a 26% commission on its own in-app purchase system. Substack, a year earlier, added iOS in-app subscriptions while keeping Stripe for web payments. Character.ai's structure, with a dedicated Stripe collection account, follows the same two-track model.

Insurance money for settlements

The third revenue line is not revenue in the usual sense. Insurance providers send the company "reimbursements for certain legal settlements." The motion does not identify the settlements, the insurers or the amounts. It is the first time the filings reviewed so far have acknowledged that Character.ai has settled legal claims and been reimbursed for them. The company's litigation history, including the December 2024 Texas lawsuit over conversations with minors and Pennsylvania's May 2026 suit, has been covered by PPC Land, and both Pennsylvania and Kentucky appear on the petition's list of the 20 largest unsecured creditors as litigation claimants.

$59.4 million across seven accounts

According to the motion, the cash management system held about $57,414,000 in unrestricted cash across seven bank accounts on the October 12 petition date. A footnote adds that the company "currently holds a $2,000,000 refundable deposit in connection with the proposed sale process," bringing total cash and cash equivalents to $59,414,000. The motion does not say who paid the deposit. The only bidder named in the case so far is Disney Worldwide Services, whose stalking horse offer is $20 million; a $2 million deposit would equal 10% of that, but the documents do not make the link.

The account-by-account figures add up to the $59.4 million total:

  • Investment Account, Morgan Stanley (ending 6883): about $38,645,000, invested in "treasuries, commercial paper and money market funds" and drawn down by manual wire into the operating account, "usually once a month."
  • Cash Sweep Account, SVB (ending 8728): about $13,615,000, receiving 95% of each night's sweep from the operating account and invested across four treasury and government money market funds. Money comes back to the operating account one business day after it is called.
  • Receipts Account, SVB (ending 6978): about $5,441,000 from Stripe.
  • Main Operating Account, SVB (ending 6963): $1,000,000. SVB sweeps everything above that floor every night.
  • TAS Interest Bearing Account, SVB (ending 3359): about $713,000, receiving the other 5% of the nightly sweep. It is not invested, and works as a same-day buffer.
  • Chase Account (ending 8238): $0, a legacy account the company may close.
  • Adequate Assurance Account, SVB (ending 5892): $0, set aside for deposits owed to utilities.

So about two thirds of the cash sits at Morgan Stanley, and nearly everything else is at SVB. The operating account is described as the "operating hub": every outbound payment, from vendors to payroll to wires, leaves from it.

An FDIC claim that does not fit the accounts

The motion asks the court to waive, to the extent needed, the deposit and investment requirements of section 345(b), which require either government-backed safety or a bond for estate money held elsewhere. In support it states that "all of the Bank Accounts are insured by the FDIC" and that each of the three banks has signed a Uniform Depository Agreement with the US Trustee.

That statement is hard to square with the account descriptions a few pages earlier. The Morgan Stanley account holds treasuries, commercial paper and money market funds, which are investments rather than deposits, and FDIC deposit insurance is limited to $250,000 per depositor, per insured bank, for each ownership category. Balances of $38.6 million and $13.6 million are well above that. The motion also hedges its own claim: having said the accounts comply, it asks for a 30-day extension "to the extent that the Cash Management System does not strictly comply." The choice of SVB carries some history too. The bank failed in March 2023 after a run by startup depositors, before First Citizens took over its business.

Corporate cards and the employee-named subscriptions

Through Ramp Business Corporation, the company has about six physical corporate credit cards plus virtual cards. According to the cash management motion, they are "primarily used to pay for recurring subscription charges for some of the Debtor's largest and most critical vendors," and have historically run at about $1,000,000 a month. The balance on the petition date was about $10,000, and the company expects card spending to fall "significantly" because of its reduced workforce.

A footnote in the wages motion adds a detail that matters for continuity. "In historical practice, individual Employees would set up the recurring charges with vendors on the Corporate Credit Cards in their name." With 66 of 86 employees leaving for Disney, some of the cards carrying vendor subscriptions may be in the names of people who no longer work for the company. Neither motion addresses how those accounts will be moved. The motion states that "the Debtor's platform and operations can only run with the support of, among others, its vendors who are paid through the Debtor's use of the Corporate Cards." Bank fees run at about $3,000 a month.

From 86 employees to 18

The wages motion gives the clearest account so far of what Disney's deal involves in practice. "As of September 30, the Debtor employed a total of approximately 86 full-time employees. As part of the proposed transaction with Disney Worldwide Services, Inc. ('Disney'), however, prepetition, 66 of those employees were offered, and accepted, employment with Disney," the motion states. Of those 66, 56 have formally resigned. The remaining 10 hold H-1B, TN or F-1 visas and are waiting for the US government to update their work authorizations so they can change employers "without losing their immigration status." The company expects them to resign "shortly after the Petition Date," and until then they keep working for Character.ai.

On the petition date, the company had 18 active full-time employees, "8 of whom are expected to remain employed by the Debtor through key portions of this case." None is part-time or unionized.

Character.ai's own announcement on Monday said Disney would provide "transition services using former Company employees it has hired." The wages motion shows the scale: more than three quarters of the workforce. The Disney arrangement as described is a non-exclusive perpetual license of certain IP and claims for $20 million. It is not an acquisition of the company. In structure, it resembles the arrangements in which large technology companies license a startup's technology and hire most of its people without buying the entity, a pattern that includes Google's $2.7 billion licensing deal with Character.ai itself in August 2024. In a different jurisdiction, the risk in that model became visible in June, when Meta had to cut Manus off from its systems after China forced the $2 billion deal apart, with Manus staff already relocated to Meta's offices.

The numbers that do not reconcile

The headcount figures leave a gap that the motion does not explain. Starting from 86 employees and subtracting the 56 who resigned leaves 30. The company reports 18. That means about 12 people left between September 30 and October 12 for reasons other than the Disney transfer, or the 86 figure, which the motion describes as approximate, was overstated. Elsewhere, the motion says the company paid $613,000 in severance to nonmanagement employees in calendar 2026, or an average of $47,000 each, which implies about 13 people. Their roles, as listed in a footnote, included members of the technical staff, product designers, staff security engineers, a senior director of product marketing, a senior brand designer, an executive assistant, a people operations coordinator and a social media manager.

Payroll scale

The last regular payroll, paid on September 30, 2026, was about $995,000 for 86 employees and covered base wages through that date. The company pays twice a month, on the 15th and the last day of the month, and funds payroll two business days ahead. On simple arithmetic, a half-month payroll of $995,000 points to roughly $2 million a month in base pay before the transfer. The next payroll, for the 18 remaining employees and the period ending October 15, was funded before the filing.

What the company wants to pay: $1.825 million

The wages motion estimates prepetition employee obligations at about $1,825,000 and asks for permission to pay $1,361,000 of it under an interim order. The proposed caps are:

  • Wage obligations: $250,000 interim and final
  • Supplemental worker obligations (contractors and temporary staff): $560,000
  • Withholding and deduction obligations: $92,000
  • Severance program: final only, $282,000
  • Former employee severance amount: $61,000
  • Non-insider retention bonus program: $86,000 interim, $258,000 final
  • Paid time off: $114,000
  • Medical, dental and vision: $72,000
  • COBRA: final only, $10,000
  • Life, disability and AD&D insurance: $2,500
  • Other benefits and reimbursable expenses: $20,000
  • Payroll processing fees: $2,000
  • Benefits manager fees: $2,500
  • 401(k) plan: $99,000

The supplemental worker line is more than twice the wage line. According to the motion, independent contractors handle "product engineering, safety moderator, data science, security engineering, general business support and more," and about six staffing agencies supply temporary workers for finance, accounting, legal, technology and administrative support. College interns are also used. The company says no individual's claim is expected to exceed the $17,150 priority cap under sections 507(a)(4) and 507(a)(5), except where accrued paid time off must be paid out under state law.

Severance and retention: the trust and safety team

Before filing, and with board approval, the company set up a severance program offering every remaining employee two months of salary if terminated without cause, plus two months of COBRA premiums. The motion asks for approval on a final basis only. It says neither the severance program nor the retention program is expected to apply to the employees moving to Disney.

Two of the remaining employees, the general counsel and the head of people, are described as likely insiders. Their severance would total $110,000, one receiving $58,000 and the other $52,000. Severance to insiders is restricted by section 503(c)(2), which requires a program generally applicable to all full-time employees and payments no more than ten times the mean severance paid to nonmanagement employees that year.

The retention bonus program covers about six employees: "members of the Debtor's trust and safety operation teams (engineers, technologists and specialists) and program managers and associate program managers for the Debtor's trust and safety operations." Payments are made at the end of each month worked during the case, prorated if the company ends someone's employment mid-month without cause. Six retention participants plus two insiders equal the eight employees the company expects to keep, which suggests that the long-term staff of Character.ai during the sale is almost entirely its safety function plus two executives.

The motion says why. "So long as the Debtor's platform and application are live, Employees must continue to monitor and implement substantial safety measures," and elsewhere, the workforce "oversees critical safety functions on the Debtor's platform, which requires daily monitoring to ensure the product is compliant with the highest safety standards." For a companion chatbot platform whose safety record has drawn lawsuits from states and families, and 6(b) orders from the Federal Trade Commission covering advertising and engagement, that is the function the company appears least able to drop.

The motion supports the retention program by citing a Reuters report of May 21, 2025, which described AI companies competing for "few dozen to around a thousand" elite engineers with multimillion-dollar pay packages.

Two calculations that do not match their own figures

Two numbers in the severance and retention sections are inconsistent with the tables in the same motion.

First, the narrative says about $86,000 will be due under the retention program in the interim period and "approximately $282,000 during the final period." The summary table and the proposed final order both put the final retention figure at $258,000. The $282,000 figure is the amount the tables assign to the severance program, so the narrative may have taken the wrong line.

Second, the insider test. The motion states that "the total severance obligation under the Severance Program for the two insiders is only approximately 1.2 times" the 2026 mean of $47,000. The total for the two insiders is $110,000, which is about 2.3 times $47,000. The 1.2 ratio matches the larger individual payment of $58,000. Both figures are far below the statutory ten-times limit, so the conclusion is unaffected, but the sentence as written does not match its numbers.

Benefits, by vendor

The motion names the companies behind the benefit programs. Payroll runs through Rippling, at a fixed fee of $60,000 a year plus about $1,000 a month. Medical cover comes from Anthem Blue Cross Blue Shield and Kaiser Permanente, with dental, vision, life, AD&D and disability through Principal. OneDigital acts as benefits manager for $5,700 a month. Empower administers the 401(k) plan, with a 25% company match; $99,000 in contributions is owed. Travelers provides workers' compensation insurance, with no open claims. The company pays 100% of employee premiums and 80% for partners and dependents. Employees get 20 days of paid time off, capped at 30 accrued days, and parental leave of 20 weeks for birthing parents and 12 weeks for non-birthing parents. Other benefits listed include wellness, commuter, mobile and Wi-Fi stipends, certain meals and "AI tools stipends."

A small inconsistency: the motion says employees are paid twice monthly, but that fees to the payroll processor are remitted "on a bi-weekly basis when it funds payroll."

The board

Three non-employee directors make up the restructuring committee. Two receive $87,500 per quarter in advance. The third, described as the "Special Director," who also sits on a conflicts committee, receives $60,000 per month in advance. On an annual basis that is $700,000 for the two directors together and $720,000 for the special director. PPC Land's first article on the case identified the committee members, from the petition's board resolution, as Christopher Sontchi, Rick Marini and Stan Chudnovsky; the wages motion does not say which of them is the special director. The company says it owes nothing on director compensation and asks for authority to keep paying it in the ordinary course.

A WeWork office, already surrendered

Document 11 shows a smaller physical footprint than the petition alone suggested. The petition gave the principal place of business as 2114 Broadway in Redwood City, California, with a mailing address in Menlo Park. The rejection motion concerns 33 Irving Place, New York, NY 10003.

The proposed order's Exhibit 1 identifies the agreement as a "WeWork Membership Agreement, dated December 10, 2025," with WeWork Building Entity 33 Irving Tenant LLC as counterparty, care of WeWork Companies LLC. The New York space was therefore under contract for about ten months before the filing. According to the motion, the company "has already vacated and surrendered the Premises," and asks for the rejection to take effect as of October 12. Any fixtures, furniture and office supplies left behind would be abandoned, and the landlord could dispose of them "at will."

The motion does not state the monthly cost, the term or the number of desks. It says only that "the costs associated with the Lease outweigh any marginal benefit that could possibly be achieved from assignment thereof." It also treats a membership agreement as an unexpired lease of nonresidential real property without discussing whether that classification fits. Under its own legal test for backdated rejection, drawn from the Namco Cybertainment decision, one factor is that "the official committee of unsecured creditors consents." No committee has been appointed, a fact the motion itself records in its background section.

Personal data left on the premises

The proposed order contains the only data-handling provision in the three documents. Paragraph 5 states that "to the extent that any Personal Property contains 'personally identifiable information,' as that term is defined in section 101(41A) of the Bankruptcy Code, or other significant personal and confidential information that identifies any employee or customer of the Debtor, the Debtor shall remove all such information from the Premises." A footnote excludes "licenses, intellectual property and all forms of intangible personal property" from what is being abandoned. In other words, whatever data or IP sits on devices in the New York office stays with the estate, and the landlord takes only physical goods.

That is a narrow provision about one office. It says nothing about the much larger question raised in the earlier filings: what happens to the conversation data of a user base the company puts at about 163 million current and past accounts. Bankruptcy sales of data have drawn scrutiny before; in August, Google won Spirit Airlines' data auction for $10 million, with customer profiles carved out of the sale.

Wind-down, again

PPC Land's article on the first batch of motions recorded that the filings disagreed on the end state: Document 7 referred to "value-maximizing wind-down activities," while Document 6 spoke of "successfully emerging from chapter 11." The wages motion moves further toward the first reading. "Furthermore, the Debtor is likely to winddown its operations following a sale of all or a portion of the Debtor's assets," it states, and later refers to the company's "ongoing sale process and eventual winddown" and to maintaining operations "for a limited period on a post-petition basis through the sale process and winddown." The severance program, according to the motion, exists to ensure "the Debtor's operations continue at least through the sale process."

The same motion also refers to "the Debtor's ongoing monetization efforts" as a reason to keep staff. Read together, the documents describe a company that intends to keep the platform running, with its ad and subscription revenue, while a sale takes place, and then expects to shut down.

Smaller drafting points

Several details may change in later versions:

  • The cash management motion says the company will add a "Debtor in Possession" legend to electronically prepared checks and forms within 14 days of the petition date. Both proposed orders say 10 days from entry of the order.
  • On new bank accounts, the proposed interim order requires notice to the US Trustee within 15 days after an account is opened or closed. The proposed final order requires 15 days' notice in advance.
  • The interim cash management order gives the US Trustee contact's email as "Linda.Casey@usdoj.gov@usdoj.gov." The wages order has the correct address.
  • The cash management motion speaks of "Debtor entities" and "the estates" in the plural, although there is one debtor.
  • The lease motion's notice list includes "the Banks" and "the Authorities," neither of which it defines. The undefined "Authorities" also appeared in the critical vendor motion, Document 6.
  • The cash management motion's notice list includes state attorneys general for all states where the company does business. The wages and lease motions do not.
  • One sentence in the cash management motion is incomplete: "The Debtor anticipates that all of the accrued prepetition Bank Fees that will come due within the first thirty (30) days of the chapter 11 case."

Why it matters for the marketing industry

For advertisers and ad tech companies, the cash management motion settles one open question and leaves another. It confirms that Character.ai earns advertising revenue, paid by "advertising partners" via ACH into an SVB operating account. That matches the supply chain visible in its ads.txt file, where Google, PubMatic, OpenX, InMobi, Teads, Outbrain, Yandex and resellers appear as authorized sellers. It does not say how much that revenue is, which means the size of the ad business remains unknown even as the company tells the court it will run the platform through the sale.

For any supply-side platform or ad network that pays Character.ai, the practical effect is that the bank details stay the same. The motion asks to keep every account open with "the same account numbers," which means payouts continue to flow into the existing operating account. Money owed for inventory delivered before October 12 would sit on the receivables side of the estate's books, not among its debts.

The staffing data matters for brand safety assessments. Inventory on a chatbot platform has been judged largely by its moderation record. The wages motion shows that moderation now rests on about six retained trust and safety employees, an unknown number of contractors including "safety moderator" roles, and vendors whose recurring subscriptions are paid on employee-named cards. The company says it can operate safely with that team. Whether buyers accept that is a separate decision.

The departure list also includes marketing roles. A senior director of product marketing, a senior brand designer and a social media manager are among those who received severance this year, before the Disney transfer.

Finally, the Disney numbers put the transaction in a clearer light. Disney's bid is $20 million for a non-exclusive license. Character.ai's estate holds $59.4 million in cash. And Disney has already taken 66 of the 86 people who built the product.

What comes next

Hearing dates and objection deadlines are blank in all three proposed orders and will be set when a judge is assigned and the first-day hearing is held. The cash management order would give the company 30 days to resolve any US Trustee concerns about the accounts. Objections to final orders go to Wilson Sonsini, the US Trustee's office in Wilmington, counsel to Disney and counsel to any creditors' committee. The company said on Monday that it expects the sale process to finish in late November or early December 2026.

Timeline

Summary

Who: Character Technologies Inc., operator of Character.ai, represented by Wilson Sonsini Goodrich & Rosati, relying on a declaration by CEO Colin M. Adams. The motions involve its 18 remaining employees, 66 employees moving to Disney Worldwide Services, contractors and staffing agencies, its banks (Silicon Valley Bank, Morgan Stanley and JPMorgan Chase), Stripe, the Google and Apple app stores, unnamed advertising partners, and WeWork.

What: Three first-day motions. Document 9 asks to keep seven bank accounts holding $59.4 million and discloses that revenue comes from Stripe subscriptions, app store purchases, advertising partners paying by ACH and insurance reimbursements for legal settlements. Document 10 asks to pay up to $1.825 million in prepetition employee obligations and shows the workforce falling from 86 to 18, with eight, mostly trust and safety staff, expected to stay. Document 11 asks to reject a WeWork membership agreement for a New York office the company has already vacated.

When: The motions were filed today, October 13, 2026, one day after the October 12 petition. Hearing dates have not been set. The sale process is expected to end in late November or early December 2026.

Where: The US Bankruptcy Court for the District of Delaware, case 26-11603. The rejected office is at 33 Irving Place, New York; the company's principal place of business is in Redwood City, California.

Why: According to the company, the motions keep cash, payroll and the safety team in place so the platform can run through a sale. The wages motion says the company is "likely to winddown its operations" after that sale. The documents also contain several internal inconsistencies, including the retention bonus total, the insider severance ratio and an FDIC insurance statement that does not fit the investment accounts described.