Business bankruptcies can sometimes leave confused shoppers wondering what will happen to goods they haven’t received, gift cards and outstanding warranties. Bankruptcy in itself is a lengthy, complicated process where it is often the responsibility of the consumer to receive what they are due.

Here is general information on what options are available to consumers if a retailer closes shop without fulfilling its promises.

When a retailer files for bankruptcy, it will commonly file Chapter 11, which means the company intends to reorganize and continue to do business, or Chapter 7, which means the company will close for good and liquidate any assets in order to pay creditors.

Chapter 11 Bankruptcy

If a business intends to continue operations under Chapter 11, it will often still redeem gift cards, fulfill services, and deliver on goods. Some Chapter 11 bankruptcies, however, quickly turn into Chapter 7 and then the chances for the consumer to receive any compensation are greatly diminished.

Chapter 7 Bankruptcy

Goods or Services Due: This bankruptcy process 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 divided among customers who didn’t receive the promised services or goods.

Customers who paid with a credit card, though, may be able to dispute the charge with the credit card company and get their money back—for this reason, among others, a consumers best bet is to pay with a credit card. The rest who paid by debit card, check or cash, will need to file a claim with the bankruptcy court administering the process—the deadline is typically 90 days after the filing date.

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’s closure.

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 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. It’s a good idea to redeem gift cards as soon as possible to avoid any headaches with bankruptcy files and court actions.


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The Better Business Bureau and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any activity described above.