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What is Going On With Debt Relief USA and Its Bankruptcy? – James

“Dear Steve,

Im another victim of debtrelief USA and would just like some positive reinforcement regarding this situation please!! i am a 24 year old collge student with 2 jobs and this couldn’t have happend at a worse time for me! i got all my up dates from http://www.drusabankruptcy.com/ however they ceased to give updates as of 10/08/2009 and i would just like to know whats going on! i am so stressed that i wonder what this world has to offer me anymore! all i want is someone to help me by atleast keeping me updated on where i can find information etc! IM broke and cant afford an attorney also so that not a choice!

Where can i get current information of the debtrelief USA bankruptcy case??? is there a number i can call? do you have any advise that i can use???

James”

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The Answer

 

Dear James,

I can appreciate your frustration. You were a client of Debt Relief USA and they got shut down. But they also held money you had paid them. Unfortunately the money you paid that was allocated towards fees for their service is most likely lost forever. Funds that were held for settling debts may be returned but don’t expect all of those back. The receiver or trustee will have to take their fee for dealing with this mess from those remaining monies held.

Due to the 12,000 or so people impacted by the closure of Debt Relief USA there is no number for people to call for information or updates. It would just be too overwhelming for the trustee to deal with the calls.

The Office of the Texas Attorney General, Greg Abbott, is contacting you because you are either a former or current customer of Debt Relief USA.

As you may know, on June 18, 2009, Debt Relief USA filed for bankruptcy and as a result, Debt Relief USA is no longer in business and is being liquidated by a court-appointed trustee. The business will not be settling your debts.

The Texas Attorney General has filed a lawsuit against Debt Relief USA in state court and has also filed a proof of claim (which is a right to payment) in the bankruptcy court, seeking to recover in part a refund of all monies it alleges are “set-aside” funds (money held by Debt Relief USA to be used for settlement of its clients’ debts) paid by current consumers and all fees that were paid to Debt Relief USA by current or former customers. The Texas Attorney General alleges that Debt Relief USA operated an unlawful debt management company and that all contracts entered between consumers and the Debtor are void and therefore unenforceable and that consumers are entitled to receive a refund of all fees paid and costs.

PLEASE NOTE, HOWEVER, THAT THE ATTORNEY GENERAL IS NOT YOUR PERSONAL ATTORNEY AND UNDER TEXAS STATUTES IS NOT ALLOWED TO REPRESENT YOU INDIVIDUALLY IN THIS MATTER. If you have questions regarding your individual legal rights, you would need to consult a private attorney. If you wish to file your own proof of claim, you are not required to have an attorney.

IF YOU ARE A CURRENT DEBT RELIEF USA CUSTOMER (the company was holding your “set-aside” funds in order to settle your debts): The Texas Attorney General is working with the Chapter 7 Trustee to ask the Bankruptcy Court to refund your “set-aside” funds to you as fully as possible. Because of the limited funds in the estate, it is unlikely that you will receive a refund of any fees that were paid to the company.

IF YOU ARE A FORMER CUSTOMER OF DEBT RELIEF USA: Because of the limited funds in the bankruptcy estate, it is unlikely that you will receive a refund of any fees that you paid to the company.

In the event additional funds are found or recovered, however, further refunds to current and former customers may be made.

The Chapter 7 Trustee has asked the bankruptcy court to limit the notices that have to be mailed to you in the future to save money on copying, postage and mailing. If that request is approved, you will not receive any additional mailings from the Court regarding this matter unless you file a written request for notices with the bankruptcy court clerk’s office; rather, all information will be available to you on the web site www.drusabankruptcy.com.

Many of the questions that most consumers have regarding the status of the bankruptcy will be answered at the web site: www.drusabankruptcy.com. If, after viewing that web site you have other questions, you can write to the Office of the Texas Attorney General, Consumer Protection and Public Health Division, P.O. Box 12548, Austin, TX 78711 or send an email to [email protected]

In the meantime, you may want to contact your creditors, inform them of your situation, and of Debt Relief USA’s bankruptcy. When you contact them, tell them that the case is pending in the Northern District of Dallas, Dallas Division, Case No. 09-33836.

The most important step you can take at this point is to make sure you have filed a proof of claim form, click here, with the court in this case so you have a chance at getting some money back.

These seizures of debt settlement companies have all been problematic and the common complaint from consumers is there is too little information flowing. This has been the case with the Hess Kennedy situation in Florida and the Allegro Law mess in Alabama.

The last update on activities in this case was:

The Meeting of Creditors took place on October 8, 2009. Under applicable bankruptcy law, this meeting was NOT attended by the Bankruptcy Judge. The meeting of creditors was presided over by the Chapter 7 Trustee, Mr. Newhouse, who placed representatives of the Debtor company, Debt Relief U.S.A. Inc., under oath and questioned them about the case. Counsel for the Trustee, Assistant Texas Attorneys General from both the Bankruptcy & Collection Division and the Consumer Protection and Public Health Division also attended and interrogated the witnesses. A transcript of the meeting is being prepared and will be posted once it is completed (anticipated within 10 days). The Chapter 7 Trustee’s accountants have been busy analyzing Debtor’s books and business records.

I have subscribed you to this page and you will receive updates from me when new information is available. I’ll post it in the comments section below. If anyone else would like to receive updates as well either subscribe to the comments or leave a comment below.

As far as what you need to do next, it’s probably bankruptcy.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

What is Going On With Debt Relief USA and Its Bankruptcy?   James
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P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Nilda

    What do you know about Freedom Debt Center in Irvine, California? Based on what I read on this board is almost the same as the Debt Relief USA. How can we get our money back? We put in $3075.00 for four months and realized that they’re not paying our creditors, by the time I found this out it was too late. Please advice. Thanks.

  • lori

    It’s un-believable to me that these idiots are getting away with this. I contacted the FTC and filed a complaint that drusa knowingly and willfully engaged in deceiptive trade practices before the not so great state of tx decided it was time they get involved. Alot of good they have done! Now I have a debt load over 20,000 because of this. As usual the little guy gets screwed. If I could afford an attorney I wouldn’t have needed a debt settlement program to begin with! I also would not be surprised if these people weren’t operating under a new name doing the same thing to others.

  • glenn jarvis

    They have not had an update since January, seems like they are just getting away with doing nothing, both the State of Texas and DRUSA! if they wait long enough maybe we will all die or just go away! or maybe they can just walk away from this crime and get away with fraud!

  • John

    I have been waiting since the filing of the bankruptcy of Debt relief USA for two years now, and can not belief that this process is taking this long. I mean they can’t even give the customer the benefit of the doubt and give them an estimated time of recovery of the oneies paid into debt relief usa? I have talked to the Texas Attorneys office, and they will not give you any nformation as to where this thing is at, and yes if you obtain your own attorney, they can assist, but it will cost you maybe 33% of the amount recovered? Why pay for something that you are intitled to? Any update to this case would be greatly appreciated.

    • http://GetOutOfDebt.org Steve Rhode

      John,

      Updates on the case can be found at drusabankruptcy.com.

      Unfortunately these type of cases always seem to move painfully slow.

      Steve

    • angie

      I guess we are just supposed to just forget about our money. Do you think this same philosophy will apply when we tell our Debt Collectors that we do not have any money left to pay with? Another case of Big business getting a slap on the wrist.I am out 10,000.00

  • glenn jarvis

    Not only have we been duped by debt relief but we thought we were being helped by the debt advocacy center, they have been shut down by the state of Ohio and the FTC, I saw that coming when they said we paid for a forensic audit that was to be used for leverage against our loan servicer, which we have been having so much trouble with, won’t mention them because we think they now have all the docs they need, and should be getting a modification to sign soon, although this company is known for it’s unscrupulous deeds, they never did an audit, and they kept avoiding my questions about it, I have filed a complaint and their assets have been frozen so we have a shot at getting that money back, the question I have is I am trying to hold on till we get an answer form our servicer, I don’t want to jeopardize our modification by going
    bk now, we do have one creditor who has went to superior court and filed for judgement, on Nov 27th, All we have left is my disability and we have a few clients leftover in our daycare business, hardly enough to get by. we need this modification. should we wait? we can’t lose the house that is our only source of income, what action can the creditor take when we only have enough to get by? Thanks for you time
    GJ.

    • http://GetOutOfDebt.org Steve Rhode

      Glen,

      I’m afraid the news out today on successful loan modifications was not good. See Real Long-Term Mortgage Loan Modifications Are a Joke.

      It is my understanding that if you are sued, lose and get a wage garnishment against you, depending on the state you live in, your income not related to your disability could be garnished.

      Steve

  • http://[email protected] Pamela

    I have been a customer with Debit Relief for over three years. They collected fees and maintence fees from us and then they also collect a SAF from us and only settled one of are creditors and was going to work on the second one, but they filed bankruptcy. We have not heard anything on what to do to get are money from them. We are broke and need the money. I have called the collectors and told them the problems, but they don’t care. We can’t paid the collectors until we get the money, because I don’t have a job and my husband is disabled and can’t work. So How do we keep them off our backs. We can’t go to another coollection agency until I find a job which is hard right now or we get the money from them. I am very upset and getting sick over this, because we can’t afford to go to court, or loose what we have which isn’t much.

    • http://GetOutOfDebt.org Steve Rhode

      Pamela,

      What is a SAF?

      Honestly, bankruptcy is going to be your only real way out at this point. The collectors are right, it isn’t the fault of the creditor that you elected to send your money to Debt Relief USA instead of the people you owed it to. Harsh, but true. That argument just isn’t going to fly with the creditors.

      Click here to find a local bankruptcy attorney you like and go in and discuss your situation with them. The minute you take some positive action to actually resolve this issue, that’s the moment you will start to feel less stressed and start to heal. This limbo you are in now is pure hell.

      Steve

  • Glenn

    We never received any notice from the court concerning the deadline of 10-19-2009, the were trying to save money by using the website for info, by the time the update came the proof of claim date had passed, can we still file, we came to believe that they were going to use business records for clients, in fact that is how they got our address to mail us the first letter, they indicated that only if you were not contacted, should we file one anyway? also they charged us over $3000 for our debt load which was 27000, that is more than 10%, and the 1 debt that we know they settled was due for $606 and was settled for $594, They were supposed to get 13% of the savings, they took $77, we are missing statements for the last two months that they were in business, but I do recall another being settled for the exact amount of the debt, and they probably added a fee to that also,even though we saved nothing, this would have come from our set aside fund, should we get that back? the last thing is, we all know that they made huge amounts of money, why can we not go after their personal property since we paid for it?and if they are the owners why do they use Florida as the place of ownership, they all live in Texas, I guess thats why they used company funds to buy things like paying federal taxes, buying meals at taco bell,
    paying for a birth at a marina for Kelly to keep her boat,
    Tanning sessions, and pay advances one week before bankruptcy, we were with them from 11-7-2007 till they went BK, 6-24-2009, they never even picked up a phone to talk to our creditors till 12-2008, our admin fees were done 7 months after we sign the contract, that was 5-2008, 13 months and nothing done but collect admin fees and program fee,I guess to pay for a monthly statement of how they were pilfering us. once they had a lawsuit against them for duping other clients in other states, they new that they were going to go into BK, lucky ones in Illinois, And Georgia received refunds through the lawsuits, while the Texas AG waited, other states should have also took action before they claimed BK, with not too much over head they either have or have spent millions, this BK is a crime.

    • http://GetOutOfDebt.org Steve Rhode

      Glenn,

      It is certainly not a good situation, that’s for sure. As for the dates, you should contact the court at the address they provided you in the correspondence and ask them about the deadline for the claim. I don’t have a clue about that in this case.

      I was shocked that after paying $3,000 you got a settlement of $594 on a $606 debt. Tragic.

      Steve

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