What to do if a retailer goes bankrupt

From the Better Business Bureau

As a result of the declining economy, the number of retailers closing their doors has increased substantially, leaving confused shoppers wondering what will happen to goods they haven’t received, gift cards and outstanding warranties. The Better Business Bureau if offering this advice for consumers on what to do if a retailer closes up shop without fulfilling its promises.

Goods or Services Due — Bankruptcy law is specific regarding who will benefit first in the case of a retailer’s liquidation. Unfortunately, customers are at the back of the line. Typically, the money gained from the selling of the company’s assets goes to paying back secured creditors, as well as any employee wages, before whatever is left over is divvied among customers who didn’t receive the promised services or goods.

Customers who paid with credit cards, though, may be able to dispute the charge with the credit card company and get their money back—for this reason, among others, BBB highly recommends consumers pay with a credit card. For the rest who paid by debit card, check or cash, they will need to file a claim with the bankruptcy court administering the process—the deadline is typically 90 days after the filing date. More information on filing a claim, including downloadable forms, is available online at www.uscourts.gov.

Warranties — The validity of any outstanding warranties varies for each bankruptcy. If a retailer goes out of business, the consumer may be able to rely on the manufacturer’s warranty. If a manufacturer goes out of business, the consumer may be able to rely on any warranties provided by the retailer. Many extended warranties and service plans are provided and administered by third parties and are typically not affected by a retailer or manufacturer going bust.

Gift Cards — In cases of Chapter 11 bankruptcy, courts will decide if the business must honor gift cards or certificates. If the business has filed Chapter 7 bankruptcy, the holder must file a claim. In some cases, consumers might actually get at least part of the value of the card back. Some retailers have tried wooing new customers by accepting a bankrupt competitor’s gift card – but this is generally a rare circumstance. BBB advises that consumers redeem gift cards as soon as possible in order to avoid any headaches with bankruptcy files and court actions.

For more advice on extended warranties, gift cards, and on how to become a savvier consumer, go to www.bbb.org.

Source: Better Business Bureau

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