Posted on August 6, 2009 at 1:11 am Hi, is it true that Debt Relief USA filed for Chapter 7 Bankruptcy? What happens to the their clients then?

Posted on August 6, 2009 at 1:15 am It's true. According to their website:"On June 18, 2009, Debt Relief USA, Inc. filed for Chapter 11 Bankruptcy in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division....On June 24, 2009, the Court determined that it was in the best interest of the estate to convert this case to a case under Chapter 7 of the Bankruptcy Code. This means that a Trustee will be appointed to supervise the wind up of the affairs of the Company and its property. Clients, certain former clients, and other creditors should receive additional information by mail."

Posted on August 6, 2009 at 1:21 am I think I've read somewhere that they have every intention of refunding their client's money "as much as possible" meaning perhaps that it would not be a 100% refund (?) and that it's subject to the bankruptcy court's approval.

Posted on August 6, 2009 at 1:22 am How does Debt Relief USA's Chapter 7 Bankruptcy affect the debt settlement industry?

Posted on August 6, 2009 at 1:52 am It would depend on the outcome of the case. On whether or not the clients who deserved to be paid back get to be paid back. If the refunds do not happen...imagine what the consumer report is going to be against the debt settlement industry. But then again there are a lot of good debt settlement companies out there who have serviced their clients well.

Posted on August 6, 2009 at 1:57 am Some clients are calling them "crooks who have stolen our money." They said that they enrolled in Debt Relief USA's debt settlement program to avoid filing bankruptcy and look where it got them. Many consumers are thinking that this bankruptcy was actually orchestrated and some are getting paranoid too over their personal information, the ones that they've disclosed with the company, being sold to other scammers.

Posted on August 6, 2009 at 2:00 am I wonder if they've informed their soon to be clients then, that they were filing for bankruptcy...wouldn't the trustee be able to track the company's financial activity before it filed bankruptcy?

Posted on August 6, 2009 at 2:05 am Also, what happens to the consumers monies that are saved up in an escrow account, I wonder. Would that be part of the bankruptcy estate...

Posted on August 6, 2009 at 2:08 am I don't think they did Hellas and since the escrow account is not under the company's name...it's in the consumers name...(?) it shouldn't be part of the bankruptcy estate..

Posted on August 6, 2009 at 2:19 am Here's an update from their website:...........UPDATE 8-3-09: On July 29, 2009, the Court held a status conference to discuss the current status of the case. The Texas Attorney General, Counsel for the Company, the Chapter 7 Trustee, Counsel for the Chapter 7 Trustee, and the U.S. Trustee, as well as one creditor, were all represented at the conference, which lasted approximately 45 minutes. The Chapter 7 Trustee, the U.S. Trustee, and the Attorney General are discussing, with the cooperation of the company, the best way to handle claims of consumers and other creditors involving the case. So far, the parties have not reached any resolution, but will continue to work toward that resolution. The Court has not yet been asked to decide what to do about notice to consumers.The Court noted that some individual consumers are filing proofs of claim with the court and that some of those proofs of claim contain confidential personal information. Therefore, the Court decided to seal from public inspection all proofs of claim filed in the case.Also on July 29, 2009, the Debtor's meeting of creditors under Section 341 of the Bankruptcy Code commenced. The company's representatives testified at the meeting and a few questions were asked of them by the Chapter 7 Trustee's counsel. Because, in part, the questions about how to handle the property of the estate and what notice to give to consumers are still up in the air, the Chapter 7 Trustee decided to adjourn the meeting and re-convene it on August 26, 2009 at 1:00 p.m.