Dr. Phil has lost a trial that will decide the fate of his media startups bankruptcy, a case that involved allegations that he plundered the company to set up his new venture.

U.S. Bankruptcy Judge Scott Everett on Tuesday turned down a bid by Dr. Phil to keep the case in Chapter 11, which wouldve allowed him to wipe out partner-turned-adversaries owed money that opposed the bankruptcy. It will now proceed as a Chapter 7 liquidation. A trustee will oversee the sale of Merit Streets assets, including whats left of its media library, and litigation over whether the TV host swindled Trinity Broadcasting under a $500 million, 10-year deal. In the decision, the court pointed to evidence indicating that Dr. Phil, whose surname is McGraw, deleted incriminating text messages and that hed try to game the bankruptcy by paying certain favored creditors over others.

Candor to the court is critical, Everett said in the bench ruling. He stressed that McGraws business was as dead as a doornail when the bankruptcy was filed.

Merit Street is simultaneously in bankruptcy court and suing Trinity Broadcasting for breach of contract over its downfall. At the same time, the TV host is launching an entirely new venture called Envoy Media.

After Merit Street filed for bankruptcy, Trinity Broadcasting sued the company, arguing that McGraw initiated the proceedings to protect his own interests. The trial determined the legitimacy of the companys Chapter 11 filing.

At the heart of the decision: McGraws plans for Envoy Media to acquire Merit Streets assets in bankruptcy while hiring the companys employees. In an unusual twist, the TV host conditioned a loan to Merit Street on the company winning its lawsuit against the network. His production banner, Peteski Productions, was the proposed debtor-in-possession.

This case is an anomaly, Everett said. He chose to convert the case to a Chapter 7 liquidation since McGraw planned to pay favored creditors and not pay disfavored creditors, as his own texts show that he want to do.

When he took the stand last month, McGraw challenged accusations that he impoperly filed for bankruptcy, emphasizing that he did everything he could to keep Merit Street running.

Im like the little engine that could, he said, referring to the months leading up to the bankruptcy in which Merit Street was starved for cash. Im doing everything I can to keep Merit up and running. This theory, that this was all a ploy to set up Envoy Media, is absurd.

He added of his decision to file for Chapter 11 protection, I didnt make the decision to file for bankruptcy. I capitulated.

Among the main issues at trial was alleged maneuvering by McGraw to gain majority control of Merit Street to secure lucrative investments from family and friends at a $425 million valuation. Relying on that representation, Trinity Broadcasting increased McGraws stake in Merit Street, via his production banner Peteski, to 70 percent while diluting its own stake to 30 percent.

Once the deal was finalized, McGraw described the plan as a gangster move to reduce the network to nothing more than a passive minority investor, according to Trinity Broadcastings lawsuit.

The TV host maintained during testimony that the deal was beneficial for both sides.

Under a purported $500 million, 10-year agreement, Trinity Broadcasting would provide production and distribution services to Merit Street and Peteski, in turn, would provide new content, including 160 new episodes.

The relationship turned sour last year when it became clear that McGraw couldnt deliver the viewership numbers, product integrations and advertising revenues he promised to Trinity Broadcasting, the company alleged. It said it spent more than $100 million by the end of June, some of which had to be recorded as loans to Merit Street. That figure ballooned as Trinity Broadcasting continued to funnel up to $13 million into the production per month while McGraw failed to deliver a single episode, though a spokesperson for the TV host has said that 214 new episodes ofDr. Phil Primetimeaired on Merit.(The vast discrepancy about what delivered entails and which episode orders factor into the Trinity deal mean theres a lot of fine print in dispute.)