What happens to your data when an AI tool goes bankrupt? The Character.AI case

What has Character.AI told its users?

The service carries on for now, a sale is expected within weeks, and if no workable bid arrives, it closes.

• The platform “remains up and running”, and paid subscriptions stay active with billing unchanged for now¹.
• The company expects the sale to be complete “by the end of November or perhaps early December 2026”¹.
• If no workable bid comes, “the platform will be wound down”¹.

It gives its reason as “legal, regulatory, and operational headwinds”¹. This is not a small service: it reported 20 million monthly active users as of early 2024, the most recent figure we found².

What happens to the data?

Character.AI says it is still protected under its privacy policy. That same policy allows information to be passed on in a sale, and the company has not said what a buyer may do with it.

The company’s post says users’ information “continues to be protected under our Privacy Policy”, and reminds them that they can delete their account or export their data¹. 3 details sit behind that sentence:

• A sale is one of the allowed reasons to share. Under “Business Transfers”, the policy says the company may disclose certain information in connection with a “sale of company assets”³. It reads like small print until the day it is used.
• Getting data out is slow. Character.AI’s help page says an export “can take 3-4 weeks to process”, and the download link then works for 7 days⁴. With the sale expected by early December, that leaves little room to wait.
• Deleting is not always total. The policy says the company may keep some information to meet its legal obligations, and may keep a popular character active even after the user who made it deletes their account³.

What should you ask before an AI tool holds your business data?

4 questions: can we get our data out, how long does that take, can we delete it, and what happens to it if the company is sold or closes?

1. Can we export everything, in a form another tool can read? Try it once before you depend on it.
2. How long does an export take? If the answer is weeks, export on a schedule, not in an emergency.
3. Can we delete our data, and what is kept afterwards?
4. What do the terms say about a sale, a merger or a closure? Look for a “business transfers” clause, and ask any supplier you rely on what would happen to your data.

And 1 habit that needs nobody’s permission: never let an AI tool hold the only copy of something your business needs.

It is the same thinking as keeping the model replaceable. A tool can change, be sold or close. The work should be able to carry on. This is general guidance, not legal advice.