In an action that seems quite ironic, the debt settlement company, Debt Relief USA, filed for bankruptcy in Texas. Kelly E. Reilly, Alvin B. Bell and James F. Wojcik are listed as the owners of Debt Relief USA on the bankruptcy petition. Consumers who have worked with Debt Relief USA are understandably concerned what will happen to their accounts – and specifically, with the payments they have made to Debt Relief USA which only went toward the company fees and not towards the debt of the consumers.

The company's attorney, Gary A. Armstrong, said Debt Relief USA will not be negotiating individual settlements. They will also not remove money from individual accounts pending the bankruptcy proceedings. Any debt settlements the company has already reached and gone into contract with client's creditors will not be affected by the bankruptcy. Armstrong stated, “our intention is to refund them (client deposits held at Debt Relief) as much as possible, but it's subject to bankruptcy court approval.”

The filings in the case state: "In business since early 2005, the Debtor assists consumer clients to establish, follow and complete a debt negotiation plan to settle and pay off their unsecured debt under favorable terms. To that end, clients deposited funds with the Debtor on a monthly basis through an automatic electronic funds transfer. Client accounts were charged a monthly maintenance or service fee.

The vast majority of the Debtor's preposition indebtedness is owed to its consumer clients. That indebtedness, which is unsecured, totals more than $4.5 million as of the Petition Date.

The Debtor is and has been the subject of several states Attorneys General investigations, pending lawsuits with disputed claims, and a pending Federal Trade Commission investigation. Claim amounts, if any, are unknown at this time. As the result of certain of these investigations, the Debtor was ordered to refund all money deposited by certain clients, including funds that had already been paid out to client's creditors in settlement of debts."

Bankruptcy is governed by law. Creditors cannot continue to attempt to collect debts from individuals who declare bankruptcy. Debt relief services, on the other hand, are simply services customers obtain based on faith. They are not governed by laws and you may or may not get results.

When a debt relief company, like Debt Relief USA files bankruptcy, it affects consumers who had been sending them money on good faith – in an effort to get out of debt without filing bankruptcy. Customers who were sending money to Debt Relief USA were looking to eventually settle with their creditors with help from Debt Relief USA – except now the money they had been sending could be completely lost due to the bankruptcy. They won't be reaching settlements with their creditors with the help of their debt relief company; they won't be getting refunds, and all the time they were sending money to Debt Relief USA they could have been paying towards their debts. They're likely to be in worse shape than they were before they began with Debt Relief USA, too – since you stop paying your creditors once you begin working with a debt settlement company.

If the customers of Debt Relief USA had chosen to file bankruptcy instead of trying to arrange debt settlement services, their actions would have been protected by federal bankruptcy laws. When the bankruptcy court ruled their debts to be reduced or completely discharged – that decision would have been final and the creditors would not be able to come after the consumer for anything else. Now that Debt Relief USA filed for bankruptcy; consumers are at risk for being sued for not paying their bills, and have even less money available to send to their creditors than they had previously.