Character.AI’s Bankruptcy Filing Shows Nearly $7M Owed to Google and Big Law Firms

Character.AI filed for Chapter 11 bankruptcy protection in Delaware and plans to complete a court-supervised sale of the company by the end of the year. Court filings show the AI startup owes nearly $7 million combined to Google and a group of Big Law firms. The company’s petition lists more than $10.6 million owed to its 20 largest unsecured creditors.

The filing lists more than $4 million owed to Google and $2.6 million owed to five prominent law firms. Hogan Lovells was owed the largest law-firm amount, about $2.1 million, followed by White & Case at about $189,000. Munger, Tolles & Olson; Skadden, Arps, Slate, Meagher & Flom; and Quinn Emanuel Urquhart & Sullivan were listed at roughly $137,000, $126,000, and $64,000, respectively.

The filing does not detail the nature of the debts, and representatives for Google and the law firms did not immediately respond to requests for comment. Character.AI, founded by former Google researchers, named Google Cloud its preferred cloud infrastructure in 2023. The startup has also faced lawsuits alleging its chatbots harmed or encouraged harmful behavior among young users, and it agreed to settle multiple lawsuits earlier this year.

Character.AI’s bankruptcy petition estimated both assets and liabilities in the $50 million to $100 million range. A filing said the “burgeoning and evolving field of AI entertainment” has been costly to develop and grow, and pointed to high costs, potential litigation-related liabilities, and regulatory engagement as pressures on cash flow. A Character.AI spokesperson told Business Insider the company has taken “meaningful steps” to sustain and improve the business amid legal, regulatory, and operational headwinds.