A notice of interest is a filing in which a party tells a court, and everyone else in a case, that it has a stake in what happens next and intends to protect it. In US bankruptcy practice it is usually filed by a creditor or a government regulator before any deadline to object has arrived. It asks for nothing. It puts the debtor, prospective buyers and the judge on notice of issues the filer expects resolved, while preserving the right to fight later. Neither the Bankruptcy Code nor the bankruptcy rules define the term; its weight comes from content and signatories.

The phrase reached the advertising press today, when a coalition of state attorneys general filed a "Notice of Interest and Reservation of Rights" in the Chapter 11 case of Character Technologies, the operator of Character.AI, setting out the privacy and safety conditions it expects any buyer of the business or its data to accept.

How a notice of interest works

Entered on the docket like any other pleading, a notice of interest typically names the filer, identifies the motions it relates to, explains the filer's interest, lists the concerns and ends with a reservation of rights: a statement that nothing in the notice waives the filer's ability to object, seek other relief or bring separate proceedings.

The Character.AI filing is a worked example. It was entered as Docket No. 33 in case 26-11603 before Judge Brendan Linehan Shannon in the US Bankruptcy Court for the District of Delaware, and the docket links it to Docket Nos. 15 and 16, a motion for approval and a motion to shorten notice filed on October 13, 2026. The notice itself runs to 28 pages across eight sections, with three exhibits: Kentucky's enforcement complaint (52 pages), a Pennsylvania State Board of Medicine petition (14 pages) and a private product liability complaint. The states say they file "out of an abundance of caution".

The core of the document is section VII, which lists nine measures the states want any purchaser to adopt. They include age assurance "that do not rely solely on self-declared birthdates", removal of characters posing as licensed professionals, a privacy programme with consent before processing sensitive data, advertising opt-outs that apply "at the account level rather than device by device", limits on using chat content to train models or for advertising, and a chance for all consumers to delete their data before any sale. The final section reserves the right to seek a consumer privacy ombudsman under sections 332 and 363(b)(1) of the Bankruptcy Code and to object to "any proposed sale, bidding procedures, or plan."

Regulators are not the only filers. Secured lenders use the same label to assert liens over a debtor's cash. In March 2025 a lender in the Hall Labs case in Utah filed a "Notice of Interest in and Refusal to Consent to Use of Cash Collateral"; section 363(c)(2) bars spending cash collateral without consent or a court order. Contractors and other lien claimants use notices to preserve interests under section 546(b), which since the 1978 Code has let a creditor perfect certain liens by notice when the automatic stay prevents it from seizing property or suing.

Sellers read a notice of interest as a map of future objections; bidders read it as a list of conditions that may follow the assets. In the Character.AI process, the debtor's prior banker approached about 28 potential buyers and received one proposal it did not consider actionable, so any condition that raises the cost of owning the data lands on a thin field.

Origin and evolution

As a practice term, the notice of interest is best traced through the problem it addresses. In 2000 the Federal Trade Commission (FTC) sued Toysmart.com on July 10 to stop the sale of a customer database its privacy policy said would "never" be shared. A July 21 settlement limited any sale to a qualified buyer in the same line of business that honoured the policy, according to a Covington and Burling review of the case law.

Congress then wrote the problem into the Code. The Bankruptcy Abuse Prevention and Consumer Protection Act, enacted on April 20, 2005, added section 332 and a privacy limb to section 363(b)(1). Where a debtor's privacy policy bars transfers of personally identifiable information, a sale needs a hearing and an ombudsman appointed by the US Trustee. The provisions applied to cases filed from October 17, 2005. The Toysmart conditions were later applied in the RadioShack, Borders and Golfsmith data sales, according to the Covington review, which cites a May 16, 2015 FTC letter in RadioShack.

State attorneys general have since grown more organised. In June 2025, 28 of them went to court to block 23andMe's sale of genetic data, filing on June 9, according to the Pennsylvania Attorney General. California pursued its own breach case. The ombudsman in that case, Neil Richards, recommended that customers give "separate and affirmative" consent before their data was sold, according to The Record. The Character.AI notice shows the next step: a coordinated multistate filing made within two days of the petition, with the National Association of Attorneys General (NAAG) bankruptcy counsel as lead signatory.

Why it matters for marketers

Customer data is a routine asset in distressed sales. A Spirit Airlines auction ended with Google buying the carrier's deidentified data for $10 million, in a case where the court appointed an ombudsman. A notice of interest is often the earliest public sign of the terms regulators will try to attach to such data.

The Character.AI conditions reach directly into advertising. The company's filings show ad revenue rising from about $0.5 million in July 2025 to about $2.5 million in August 2026, nearly half of monthly revenue. The states want any sale of personal data or disclosure for targeted advertising disclosed, opt-outs honoured across accounts rather than devices, and chat content kept out of advertising unless users consented. For any buyer that planned to monetise the user base through ads, those terms define what the data can still be used for.

The filing also consolidates years of scrutiny. Texas issued civil investigative demands to Character.AI over children's privacy, 44 attorneys general wrote to 13 AI companies on August 25, 2025, and the FTC sent 6(b) orders to seven chatbot operators on September 10, 2025. A notice of interest carries those concerns into the sale, where a buyer can be asked to accept them.

Limitations and disputes

A notice of interest binds no one. It requests no order, triggers no hearing and creates no right the filer did not already have. The reservation of rights is largely declaratory: a party that holds a right to object keeps it whether or not it says so.

Its reach is also limited by the statute. The ombudsman mechanism in section 363(b)(1) applies only where a privacy policy restricts transfers, so a policy that already disclosed a possible sale may not trigger it. Character.AI has separately told the court that its roughly 163 million current and past users are not creditors entitled to notice, narrowing the formal role of the people whose data is at issue.

Even the coalition's size is contested on the record. The Colorado Attorney General's press release says Phil Weiser led the filing with attorneys general from 37 other jurisdictions, 38 in total. The notice's own preamble lists 39 states and the District of Columbia, 40 in total. First-day filings describe a separate multistate investigative group of 46 states and territories.

Not the same as

  • Notice of appearance and request for notices. Under Bankruptcy Rules 2002 and 9010, a party asks to be served with filings. Colorado filed one on October 13, 2026 and Tennessee filed a request for service today.
  • Objection. A formal opposition to a motion that the court must rule on. The Character.AI notice expressly reserves the right to object later.
  • Statement of interest. A filing by the US Department of Justice under 28 U.S.C. 517 setting out the federal government's view in a case to which it is not a party.
  • Indication of interest. In mergers and acquisitions, a non-binding preliminary offer from a potential buyer.

In property law the phrase carries a separate meaning: a recorded notice that preserves an old claim against a marketable record title statute. Utah's version requires a sworn written notice during the 40-year period after the root of title.

Recent developments

The notice landed on the day of the first-day hearing, scheduled for 1:30 p.m. Eastern today, at which the bidding procedures motion was not on the agenda. If procedures are approved as proposed, bids are due November 20, an auction would follow on November 23 and a sale hearing on November 24, 2026, under a schedule that also preserves Disney's jury trial rights. Disney's $20 million stalking horse bid is for a non-exclusive licence of intellectual property, not the app, and the user data remains in the estate. Meanwhile 66 of the company's 86 staff have accepted jobs at Disney, leaving the debtor-in-possession with 18.

"Bankruptcy cannot become a way for a company to walk away from its responsibility to protect children and consumers," Weiser said in the release. The states say they negotiated with the company before the petition but "could not reach agreement." Pennsylvania's psychiatrist chatbot case is attached as an exhibit, and the wider debate over the companion chatbot category runs through the filing. Whether the judge or any bidder adopts the nine measures will test what a notice of interest can achieve.

Timeline

  • October 22, 1994 - Rewritten section 546(b), covering perfection of liens by notice, takes effect.
  • July 10, 2000 - The FTC sues Toysmart.com to stop the sale of its customer database.
  • July 21, 2000 - Toysmart settlement limits any sale to a qualified buyer honouring its privacy policy.
  • April 20, 2005 - BAPCPA enacted, adding the consumer privacy ombudsman in section 332.
  • October 17, 2005 - Ombudsman and personal data sale provisions apply to new cases.
  • December 1, 2009 - Ombudsman appointment deadline extended from five to seven days before a sale hearing.
  • May 16, 2015 - FTC letter on the sale of RadioShack customer data.
  • December 2024 - Texas opens investigations into Character.AI over children's privacy.
  • June 9, 2025 - 28 attorneys general go to court to block 23andMe's sale of genetic data.
  • August 25, 2025 - 44 attorneys general write to 13 AI companies on child safety.
  • September 10, 2025 - FTC issues 6(b) orders to seven AI chatbot companies.
  • May 1, 2026 - Pennsylvania State Board of Medicine petitions against Character Technologies.
  • October 12, 2026 - Character Technologies files for Chapter 11 in Delaware.
  • October 14, 2026 - State attorneys general file a notice of interest and reservation of rights on the day of the first-day hearing.
  • November 20-24, 2026 - Proposed bid deadline, auction and sale hearing, if procedures are approved.

Summary

Who: Creditors, lienholders and government regulators file notices of interest. In the Character.AI case, attorneys general from 39 states and the District of Columbia filed one, coordinated by NAAG bankruptcy counsel and led by Colorado.

What: A docket filing that states a party's stake and concerns, requests no relief and reserves the right to object, seek an ombudsman or take other action later.

When: Usually early in a case, before objection deadlines. The Character.AI notice was filed today, October 14, 2026, two days after the Chapter 11 petition.

Where: In US bankruptcy courts, in this case the District of Delaware, case 26-11603. A separate property law meaning applies in land records.

Why: To put the debtor and bidders on notice of conditions that may follow the assets, including privacy and advertising limits on customer data, without committing to litigation before the terms of a sale are known.