States ask bankruptcy court to shield Character.AI users’ private conversations

A bipartisan coalition of state attorneys general is asking a bankruptcy court to protect Character.AI users’ personal data as the chatbot company seeks bankruptcy protection. The states say users should be able to access and delete their information before any sale, and they want restrictions on how a buyer could use it afterward.

In a statement announcing the court filing, North Carolina Attorney General Jeff Jackson said Character.AI collected private conversations involving children, as well as sensitive discussions of mental health, relationships and emotional distress. The states argue that those records should not be treated as ordinary company assets that can simply pass to a purchaser.

The coalition also says it may object to any proposed sale or bankruptcy plan that does not adequately protect consumers. Its filing asks the court to prioritize the data issue and to require strong privacy and safety protections for any transfer.

The dispute follows scrutiny of Character.AI’s chatbots, which are designed to imitate human conversation and relationships. The North Carolina attorney general’s office says children as young as 13 could use the platform and that some bots presented themselves as psychologists, therapists or doctors.

North Carolina and other states began investigating the company after a 2024 wrongful-death lawsuit alleged that its chatbots fostered an emotionally and sexually exploitative relationship with a child, reinforced his suicidal thoughts and contributed to his death by suicide. The attorney general’s office says the state investigation identified potential consumer-protection and privacy violations; those allegations are not findings established by the bankruptcy filing.

Character.AI has voluntarily restricted minors’ access to some chatbot features, according to the state release. The attorneys general say those steps are incomplete and could be circumvented or reversed by a future purchaser, making enforceable protections in the bankruptcy process a central concern.

The coalition includes attorneys general from dozens of states, as well as the District of Columbia. The filing sets up a broader test of how personal information held by an AI company should be handled if the business and its assets change hands through bankruptcy.