Wallingford, CT – A question many shoppers are asking this holiday season is, what happens if they buy gifts from a retailer that subsequently goes bankrupt.
The recent closing of a substantial number of large retailers this year has shoppers understandably worried about gift cards, warranties and post-holiday gift returns.
Connecticut Better Business Bureau President, Paulette Hotton Scarpetti, says the high bankruptcy rate has consumers confused and worried.
“Consumers are understandably concerned and want to know that their holiday purchases are protected if a retailer goes under.”
When a retailer files for bankruptcy it may file either for Chapter 11, which means it intends to reorganize and continue to do business, or Chapter 7, which means closing down permanently and liquidating assets to pay creditors.
If a retailer intends to continue under Chapter 11, it will often deliver on goods, redeem gift cards and fulfill services. Sometimes, however, a Chapter 11 can quickly turn into a Chapter 7, leaving consumers at the end of the line of creditors, and often receiving no compensation at all.
Your BBB has some advice for consumers if a retailer files for Chapter 7 bankruptcy:
Pay with Credit Cards
Even though customers are not preferred creditors, if an item is purchased with a credit card, they may be able to dispute the charges with the credit card company and get their money back. People who pay with a debit card, check or cash will have to file a claim with the bankruptcy court administering the process, within a 90-day period. Information on filing a claim and forms may be found at www.uscourts.gov
Gift Cards
Your BBB recommends redeeming gift cards as soon as possible to avoid any problems if a retailer does go under. This can prevent having to file court documents for a claim. In rare cases, consumers may get some of their money back, and some retailers are even trying to attract new customers by accepting bankrupt competitors’
Warranties
The validity of an outstanding warranty varies with each bankruptcy. If a retailer goes out of business, the manufacturer may still honor the warranty. If a manufacturer closes its doors, consumers may be able to rely on warranties provided by the retailer. Many extended warranties and service contracts are administered by third parties and usually are not affected when a retailer closes its doors.
You can find more information on gift cards, extended warranties and how to be a savvier consumer at www.bbb.org.
