Debt Settlement Company Files for Bankruptcy

Look in the dictionary under "ironic" and you may see a picture of Debt Relief USA of Addison, Texas.  In 2009, Debt Relief USA, a company that advertised services to help consumers avoid Bankruptcy, filed for its own Bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.  While this fact may be humorous, it was not the least bit funny to thousands of individuals harmed by this debt settlement company.

Prior to filing for Bankruptcy, Debt Relief USA targeted consumers around the country promising it would make them "debt-free in as little as 36 months."  Its program encouraged debtors to stop paying their debts and, instead, pay Debt Relief USA.  The company would then build a "settlement reserve" to hopefully settle with the creditors.  The company promised to negotiate settlements at lower pay-offs and to eliminate all the debts.  Problems arose, however, when most of the creditors failed to settle with Debt Relief USA's customers, leading to lawsuits and judgments.

A few years ago, the Federal Trade Commission and Attorneys General in several states began investigating Debt Relief USA. In 2009 Debt Relief USA filed Chapter 11 Bankruptcy, claiming approximately $5 million in debts to its customers.  In December 2010, after diligent legal action by the Texas Attorney General, the Bankruptcy Court ordered $3.7 million to be disbursed to victims of Debt Relief USA.  The AG's Office also reports that Debt Relief USA has converted its case to Chapter 7, as it can no longer do business. 

In light of the recent economy, job loss, and other financial problems, debt settlement companies, like Debt Relief USA, have increased in popularity.  Many of these companies try to dissuade consumers from filing for Bankruptcy, claiming the settlement process will be better with no future problems.  The truth is -- debt settlement programs affect credit ratings (similar to Bankruptcy), can lead to late fees and interest, and may not work.  They can also lead to garnishments, lawsuits, judgments, and liens against property.

The absolute way to eliminate or significantly reduce your debts is through consumer Bankruptcy.  Chapter 7 and Chapter 13 provide some of the strongest protections under the law.  Before agreeing to any debt relief program, it is critical to discuss your financial situation with an experienced and dedicated Houston Bankruptcy attorney.  The Law Office of Nicholas R. Westbrook can help.  We offer a free legal consultation at numerous loations around Houston to determine the best course of action for your unique circumstances.  While debt settlement can seem like a good option, it will not protect you like a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy.  To learn more about your legal options, please call us today at (713) 893-6204.  Stop letting debt ruin your life.