There’s been a new development in Shilo Sanders’ ongoing bankruptcy case, with his legal team pushing back hard against claims brought by the court-appointed trustee overseeing the proceedings.
Earlier this fall, the trustee handling Sanders’ Chapter 7 bankruptcy filed a complaint alleging that the former Colorado football player violated bankruptcy law by making unauthorized transfers totaling roughly $250,000.
Now, Sanders’ attorney, Keri Riley, has formally asked the court to dismiss that complaint, arguing that the trustee’s claims are fundamentally flawed.
At the center of the dispute is money Sanders earned through name, image, and likeness (NIL) deals after filing for bankruptcy in October 2023. Those earnings flowed through two companies Sanders established: Big 21 LLC and Headache Gang LLC.
According to Riley, the trustee has no legal right to recover those funds.
“All of the funds paid into, and subsequently out of Big 21 post-petition were post-petition earnings of the Debtor,” Riley wrote in a court filing obtained by USA TODAY Sports. She added that the trustee himself acknowledged Sanders earned NIL income both before and after filing for bankruptcy.
The legal issue hinges on a basic bankruptcy principle: what belongs to the bankruptcy estate and what does not. Under federal bankruptcy law, assets earned before a bankruptcy filing are typically subject to distribution to creditors, while earnings from services performed after the case begins generally are not.
“While the estate is entitled to ‘proceeds’ or ‘profits’ from the assets of the estate,” Riley wrote, “the (law) expressly excludes ‘earnings from services performed by an individual debtor after the commencement of the case.’”
She argued the NIL income was generated after Sanders filed his petition and therefore cannot be collected by the trustee “under any theory.”
A judge will now need to decide whether trustee David Wadsworth has sufficiently stated a claim to move forward. If the court grants Sanders’ motion to dismiss, the trustee’s case would end there. If not, the dispute could advance to trial.
The trustee’s complaint is just one piece of Sanders’ broader bankruptcy battle. Sanders filed for Chapter 7 protection in 2023 to discharge more than $11 million in debt, most of it tied to a default judgment in a Texas lawsuit.
That judgment stems from a 2016 personal injury suit filed by John Darjean, a former security guard at Sanders’ Dallas school, who accused Sanders of causing permanent injuries during a 2015 incident. Sanders claimed self-defense but did not appear at trial in 2022, resulting in an $11.89 million default judgment against him.
Darjean has actively opposed Sanders’ attempt to discharge the debt and has filed separate complaints arguing the bankruptcy should not erase what he is owed.