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Debt Relief USA Owners to Personally Pay Millions in Court Award

I don’t think the former corporate directors of Debt Relief USA will soon forget July 15, 2011. On that day a State of Washington court awarded a class action award of $1.5 million against the directors of a now defunct and bankrupt debt settlement company.

James Wojcik, Kelly Reilly, and Alvin Bell will have to personally pony up this big damage award. The Court also tacked on litigation costs and punitive damages as well. – Source

In an alleged attempt to shake the liability of the Debt Relief USA business the then owners bankrupted the company to attempt to control damages. In June of 2009 Debt Relief USA filed a Chapter 11 bankruptcy which was soon converted to a Chapter 7. The bankruptcy proceeding is ongoing.

A Special Meeting of the Board of Directors of Debt Relief USA, Inc. (the “Corporation”), was held at 16200 Addison Road, Suite 105, Addison, Texas 75001, on June 1, 2009.

The following directors were present: Kelly E. Reilly, James F. Wojcik, and Alvin B. Bell.

Kelly E. Reilly, President of the Corporation, called the meeting to order and stated that the meeting had been called in accordance with the Bylaws of the Corporation. James F. Wojcik acted as Secretary of the meeting.

The Chairman then announced that meeting was called to consider the following: the liquidation and shut down of the Corporation’s operations and the filing of a bankruptcy petition to wind up the Corporation’s affairs. After discussion and motion duly made, seconded and carried, it was:

RESOLVED, that the Corporation file a petition under Chapter 11 of the Bankruptcy Code, that the officers of the Corporation are directed and empowered to take all reasonable and necessary actions to retain counsel, pay retainers, sign bankruptcy petitions and related schedules and documents, prepare a plan of liquidation, and otherwise wind up the affairs of the Corporation.

There being no further business to come before the Board of Directors, on motion duly made, seconded and carried, the meeting was adjourned.

At the time of the bankruptcy the court documents show the company owned interest in XO Communications and co-owned a Mercedes S550 with Alvin Bell. Ironically they also owed $25,000 to American Express and $15,000 to Bank of America on credit cards. – Source

The case was originally filed in August 2009 by The Scott law Group in the State of Washington on behalf of 345 consumers.

This is not the only such case The Scott Law Group is pursuing and a number of other debt settlement companies are now facing the same fate. Owners of advanced fee debt settlement companies that offered debt settlement services in the State of Washington should expect to see this develop further if they charged fees in excess of the Washington debt adjusting act.

B. Mack Mayo, attorney at The Scott Law Group, P.S., said, “Debt settlement companies often operate on a business model specifically tailored to exact as much money as possible from already financially vulnerable individuals. This judgment sends a strong message to individual corporate officers whose companies violate Washington consumer protection laws, including the protections afforded by our debt adjusting act.”


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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.
  • Alex Viecco

     Needless to say that this is something that will shake up this industry in a big way.  As you have attorneys get these cases together on behalf of clients who were offered ADVANCE FEE models and that received little or no benefits.
    This might be the final way to send the message to the companies praying on consumers that they need to look out.  If ever transparency is needed, it is now more than ever.  Consumers and even these law firms I am sure will be looking for all the companies that have taken funds from consumers by the millions and have done the consumers no service.
    Some operators would actually think that now that they have collected their payday and possibly even moved on or transferred to an :”Attorney Model” are free from harm, they should read this post very carefully.
    Bottom Line is to ALWAYS do right by the consumer and in that manner you can substantiate your claims!
    Alex Viecco

    • Steve Rhode

      The irony is that for all that time we were saying to pay attention to the fundementals of running a debt relief company, we were the ones called crazy.

      There is no getting away from the underlying issue that debt relief consumers will always be viewed as a disadvantaged class of consumers where regulators and courts will defend them first whenever possible. Shortcuts in compliance lead to bigger issues and in this case, large personal fines against the operators.

      It seems like the State of Washington laws were ignored or overlooked in this case. It was an easy situation to avoid.

  • Brad

    Hey Steve!  I just read this and found it VERY interesting!! Is this a pattern on the rise for those dreaded debt consolidation companies? I have been using your info on the United Financial Systems (of Florida) demise since last fall.  I am still awaiting the full refund, and have been in touch with Att Gen of FL and WI (where I reside).  I’m wondering if the state of WI Justice Dept can go after and file their own suit, as state of Washington did?  One of the Att Gen of WI spokespersons told me they have 30-60 days to comply or else that very well could happen.  Any insight?  And BIG THANKS to everything you’ve done to help me & 1000s of others when we were at our wits end!! :)
    -brad k

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