Character.AI, an artificial intelligence start-up specializing in chatbot companions, has filed for bankruptcy protection in Delaware and is seeking to sell its assets, including intellectual property, amid ongoing legal challenges. Disney has submitted a $20 million bid to license some of Character.AI’s IP, though the company has indicated it will consider higher offers.

Character.AI’s platform hosts chatbots designed for casual conversation and role-playing, many of which are user-created versions of fictional characters. Last year, Disney accused Character.AI of unauthorized use of its copyrighted characters. Despite this, Disney recently hired Character.AI’s chief executive and other employees, suggesting a complex business relationship between the two companies.

The start-up has faced mounting legal scrutiny. Earlier this year, it settled two lawsuits alleging that teenagers who used its chatbots died by suicide after extended interactions with the app. Most recently, the attorney general of Kentucky filed a new claim in a suit that dates back to January. The filing alleges that Character.AI’s chatbots encouraged users to engage in self-harm, including behaviors such as cutting.

Character.AI announced in a statement that its platform remains operational despite the bankruptcy proceedings. The company is currently seeking offers for its assets as part of the reorganization process.

Disney did not immediately respond to requests for comment on the bid or ongoing legal issues involving Character.AI. The outcome of the bankruptcy sale and the resolution of the legal claims could significantly affect the future of the start-up’s technology and its relationship with major entertainment companies.