A federal bankruptcy judge has ordered Dr. Phil McGraw’s collapsed television startup Merit Street Media into liquidation under Chapter 7, ruling that creditors would be better protected if an independent trustee sells off its assets.
Judge Scott W. Everett of the U.S. Bankruptcy Court for the Northern District of Texas issued the decision Tuesday, calling the collapse of McGraw’s short-lived network an anomaly and saying there was “never a pretense of rehabilitation or reorganization,” according to multiple media reports.
Merit Street, a joint venture between McGraw’s Peteski Productions and Trinity Broadcasting Network, filed for Chapter 11 protection on July 2 after mounting losses. At the time, the company sued TBN for breach of contract and abuse of control; TBN countersued, accusing McGraw of fraud and mismanagement.
Everett said liquidation was preferable to either dismissing the bankruptcy or appointing a new trustee under Chapter 11.
“Creditors can have faith that a trustee will be fair and impartial,” he wrote, adding that dismissal would have allowed McGraw to “pay his favored creditors rather than his unfavored creditors.”
The judge sharply criticized McGraw’s conduct during the bankruptcy, noting that Merit Street’s assets were being positioned for takeover by a new company he created, Envoy Media.
Court documents showed that McGraw had referred to his strategy as a “gangster move” intended to reduce TBN to a minority stake. The judge said McGraw later deleted an unflattering text about wiping out claims by TBN and another creditor, Professional Bull Riders, to keep it from being disclosed — a violation of court orders.
TBN and related entity TCT Ministries had sought an emergency order to dismiss the Chapter 11 case, convert it to Chapter 7, or appoint a trustee, which Professional Bull Riders supported. PBR claimed it was owed $181 million after Merit Street failed to pay for a programming deal.
According to TBN’s lawsuit, McGraw had promised the broadcaster 90-minute “Dr. Phil Primetime” episodes that would cut production costs by moving from California to Texas and trimming staff. Instead, the filing alleged, not a single episode was produced.
TBN’s countersuit accuses McGraw of scheming to fleece the Christian network and enrich himself and his affiliates.
“We respectfully disagree with the court’s ruling and take issue with its comments concerning Dr. Phil McGraw,” Peteski said in a statement. “Dr. Phil is a leader of the highest integrity whose actions reflect honesty, ethics, and a life-long commitment to helping people. We are reviewing all of our options regarding an appeal, which is likely.
Merit Street launched in April 2024, claiming to reach 80 million homes with programming anchored by “Dr. Phil Primetime.” Less than a year later, the judge’s ruling ensures the venture’s assets will be sold off to repay creditors
