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???


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 public.information@oag.state.tx.us.

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.

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.
See also  Illinois Attorney General Sues Two Debt Settlement Firms

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

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

Damon Day - Pro Debt Coach

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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.
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