Shilo Sanders’ attorney has asked a court to dismiss a complaint from his bankruptcy trustee.
The trustee alleges Sanders made unauthorized transfers of about $250,000 from his NIL earnings.
The bankruptcy case stems from an $11.89 million court judgment against Sanders from 2022.
An attorney for Shilo Sanders has fired back at the trustee who is handling Sanders’ bankruptcy case and has asked the bankruptcy court to dismiss the trustee’s complaint against Sanders more than two years after the former Colorado football player filed a Chapter 7 petition with more than $11 million in debt.
In October, the trustee had filed a complaint against Sanders, son of Colorado coach Deion Sanders, claiming Shilo Sanders violated bankruptcy law by making unauthorized transfers of approximately $250,000.
Sanders’ attorney, Keri Riley, recently responded to this in a court filing by essentially saying the trustee got it all wrong. The issue relates to Shilo Sanders’ earnings from his name, image and likeness (NIL) through two companies he created called Big 21 LLC and Headache Gang LLC:
Was some of that money the property of the bankruptcy estate, which is managed by the trustee? Or was it property of Shilo and his companies?
A judge will have to decide whether the trustee, David Wadsworth, has sufficiently pleaded his case in his attempt to recover money from Sanders, 25. But it’s only one part of the larger bankruptcy case involving Sanders, which remains pending.
What is latest in Shilo Sanders bankruptcy case?
Sanders filed for bankruptcy in October 2023 in an effort to get out of more than $11 million in debt, almost all of it stemming from a court judgment against in 2022. But one of the prices of trying to get out of debt in bankruptcy court is that a trustee is put in charge of rounding up the debtor’s non-exempt assets for the bankruptcy estate, to be sold and divided among the creditors. This generally includes assets a debtor earned before filing for bankruptcy, not after.
Sanders’ attorney says these earnings came after he filed his petition for bankruptcy and the companies are distinct from the bankruptcy estate. She argued the earnings were not subject to collection by the trustee “under any theory” and the trustee took no action to manage the Big 21 company.
“All of the funds paid into, and subsequently out of Big 21 post-petition were post-petition earnings of the Debtor,” Shilo Sanders’ attorney said in the recent court filing obtained by USA TODAY Sports. “The Trustee acknowledges in the Complaint that the Debtor was earning money from NIL Deals both pre- and post-petition. As evidenced by the allegations in the Complaint, the NIL Deals were and are the Debtor’s primary source of income…. While the estate is entitled to ‘proceeds’ or ‘profits’ from the assets of the estate, the (law) expressly excludes ‘earnings from services performed by an individual debtor after the commencement of the case.’”
What does it mean for Shilo Sanders’ bankruptcy case?
If the judge grants the motion to dismiss the trustee’s complaint, he doesn’t have to give back the money in question. If the judge doesn’t grant it, the trustee’s complaint can proceed to trial on that issue.
A law professor at Texas, Angela Littwin, described the trustee’s complaint against Sanders as a “big deal” but also questioned why the trustee didn’t file his complaint until now.
“Any revenue related to Sanders’ work that is entirely post-petition belongs to his fresh start,” Littwin told USA TODAY Sports. On the other hand, if Sanders made improper transfers, it’s a problem.
“Bankruptcy provides debtors with significant relief,” Littwin said. “Debtors need to earn this relief by being 100% above board.”
It’s only one part of the Shilo Sanders proceedings
Besides the trustee’s complaint against Sanders, two other complaints remain pending against Sanders in bankruptcy court. The larger bankruptcy matter of rounding up and dividing his assets for creditors also remains pending.
Separately, a law firm has sued Sanders alleging he owes it more than $164,000 in unpaid bills related to the bankruptcy case and the lawsuit that led to it.
Almost all of Sanders’ debt is owed to one man — John Darjean, a former security guard from Sanders’ school in Dallas. Darjean sued Sanders in 2016, alleging he caused him permanent and severe injuries when tried to confiscate his phone in 2015, when Sanders was 15. Sanders claimed self-defense in court proceedings but didn’t show up for the trial in Texas in 2022, leading to a default judgment against him of $11.89 million.
After Darjean moved to collect on that debt, Sanders filed for bankruptcy to try to get out of it. Darjean is seeking to get paid the full judgment and filed the other two complaints against Sanders that argue that Sanders shouldn’t be allowed to discharge the debt owed to him.
Shilo Sanders is the middle son of Deion Sanders. He was waived by the NFL’s Tampa Bay Buccaneers before the season and is not currently playing football. His younger brother Shedeur Sanders is quarterback of the Cleveland Browns.
Follow reporter Brent Schrotenboer @Schrotenboer. Email: bschrotenb@usatoday.com