Judge Rules Against Dr. Phil in Merit Street Bankruptcy, Orders Case to Be Converted to Chapter 7 Liquidation

A federal judge has delivered a significant blow to Dr. Phil McGraw’s Merit Street Media, ruling to convert its Chapter 11 bankruptcy proceedings into a Chapter 7 liquidation. This decision marks a critical turn for the television personality’s failed media venture, emphasizing the court’s focus on equitable treatment for creditors amidst a contentious legal battle.

The ruling, handed down by Judge Scott W. Everett of the U.S. Bankruptcy Court for the Northern District of Texas, came after Merit Street Media, a joint venture primarily owned by Trinity Broadcasting Network (TBN) and McGraw’s Peteski Productions, filed for Chapter 11 bankruptcy protection earlier in July 2025. This move initiated a complex web of lawsuits and counter-allegations between the parties, with TBN and Professional Bull Riders (PBR) emerging as prominent creditors seeking clarity and impartiality in the process.

The Genesis and Dissolution of Merit Street Media

Merit Street Media was established as a joint venture with TBN holding a 70% stake and Dr. Phil McGraw’s Peteski Productions owning 30%. McGraw, renowned for his long-running daytime talk show, launched Merit Street Media in April 2024, aiming to reach a broad audience with programming anchored by “Dr. Phil Primetime.” The venture faced financial difficulties, leading to its Chapter 11 bankruptcy filing on July 2, 2025.

Upon filing for bankruptcy, Merit Street Media also initiated legal action against TBN, alleging breach of contract and abuse of its position as the controlling shareholder. In response, TBN countersued McGraw, leveling accusations of a fraudulent scheme designed to “fleece” the Christian broadcaster and enrich himself and his affiliates.

Key Allegations and Legal Maneuvers

The bankruptcy case quickly escalated into a high-stakes dispute. Professional Bull Riders (PBR), which held a substantial $181 million claim against Merit Street after terminating a licensing agreement due to non-payment, joined TBN in advocating for a conversion to Chapter 7.

Evidence presented in court suggested that McGraw had been working on “getting rid of TBN” as a partner and described executing a “gangster move” to reduce TBN to a non-controlling shareholder. Furthermore, McGraw formed a new company, Envoy Media, after Merit Street filed for Chapter 11, with plans to acquire the debtor’s remaining assets. This move raised significant concerns for creditors and the court, particularly the judge, who found it to be an unusual circumstance in a bankruptcy proceeding.

Another critical piece of evidence involved allegations that McGraw deleted an “unflattering” text message. This message reportedly detailed his strategy to “wipe out” TBN and PBR’s claims through the Merit Street bankruptcy. Judge Everett found that McGraw had evidently deleted this message to avoid its production in court, a direct violation of judicial orders.

Judge Everett’s Ruling and Rationale

Judge Scott W. Everett’s decision to convert the case to a Chapter 7 liquidation was rooted in several key findings. He explicitly stated that he had “never seen a case” quite like Merit Street Media’s, referring to it as an “anomaly.”

The judge concluded that there was “never has been a pretense of a rehabilitation or a reorganization” for Merit Street Media’s business, describing it as “dead as a doornail” at the time of its bankruptcy filing. He expressed concerns that allowing the Chapter 11 case to continue, or merely dismissing it, would enable McGraw to prioritize “favored creditors” over “unfavored creditors” like TBN and PBR. Judge Everett emphasized that a Chapter 7 liquidation would ensure fairness and impartiality in the sale of Merit Street’s assets under the oversight of a trustee.

Implications of Chapter 7 Liquidation

The conversion to Chapter 7 bankruptcy means that Merit Street Media will undergo dissolution. A court-appointed trustee will now take control of the company’s assets, oversee their sale, and distribute the proceeds among creditors in accordance with legal priorities. This process is designed to be fair and transparent, aiming to maximize recovery for all creditors without undue influence from the debtor’s former management. For TBN and PBR, this offers a more structured and impartial path to potentially recoup their claims.

Dr. Phil’s Response

In response to the court’s ruling, a spokesperson for McGraw’s Peteski Productions expressed strong disagreement. They stated, “We respectfully disagree with the court’s ruling and take issue with its comments concerning Dr. Phil McGraw. Dr. Phil is a leader of the highest integrity whose actions reflect honesty, ethics, and a lifelong commitment to helping people.” The spokesperson indicated that they are “reviewing all of our options regarding an appeal, which is likely.”

Conclusion

The judge’s ruling against Dr. Phil in the Merit Street Media bankruptcy case, converting it to a Chapter 7 liquidation, represents a significant development in the ongoing legal disputes surrounding the failed media venture. The decision underscores the judiciary’s commitment to protecting creditors’ interests and ensuring impartiality in bankruptcy proceedings, particularly when concerns about management conduct and rehabilitation viability arise. As Peteski Productions considers an appeal, the future of Merit Street Media’s assets and the resolution of creditor claims now rest in the hands of a court-appointed trustee.