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Character.AI's Parent Seeks Bankruptcy Protection, Leaving User Mental Health Data in Legal Limbo

Published · updated · curated by AI Is Going Just Great

Source: wfae.org ↗

Sensitive information should not simply become an asset that can be sold during bankruptcy.

Character.AI's parent company filed for bankruptcy, and now a bipartisan coalition of state attorneys general is trying to stop millions of users' most sensitive private conversations from being auctioned off to the highest bidder. North Carolina AG Jeff Jackson, joining the coalition, warned that data covering mental health struggles, relationships, and emotional disclosures — collected from users as young as 13 — should not simply be treated as a liquidatable asset.

The coalition is asking the bankruptcy court to let users access and delete their data before any sale, and to restrict how a future buyer can use those conversations. Jackson called the case a potential precedent for how personal data is handled when an AI company goes under. North Carolina had already joined a separate investigation into Character.AI over consumer protection and privacy violations before the bankruptcy filing.