Claim: E-mail urges consumers to redeem gift cards issued by companies that have recently filed for bankruptcy.
Status: Partly true.
Example: [Collected via e-mail, April 2008]
The following companies just filed for Bankruptcy:
If you have gift cards from the above list use them ASAP, they will not be valid for much longer.
PASS THE WORD.
Origins: The increasing market for retail store gift cards (estimated to reach
Of course, it can also prove rather difficult for consumers to reclaim the value of gift cards and gift certificates issued by retailers who have since gone out of business, an issue addressed by the above-quoted warning urging readers to use as soon as possible gift cards issued by several chains identified as recently
having filed for bankruptcy (because such cards “will not be valid for much longer”). Although the warning isn’t necessarily bad advice, the message also promotes some misconceptions.
First of all, a company’s “filing for bankruptcy” doesn’t always mean it is going out of business. Companies typically file for
Additionally, although federal law allows companies to stop honoring gift cards when they file for
Finally, not all the companies listed in the warning quoted above have filed for
- Hollywood Video: Movie Gallery Inc., the second largest video rental company in North America (after
Blockbuster) filed for Chapter 11protection in October 2007.The Movie Gallery/Hollywood Video chain emerged from bankruptcy reorganization in May 2008but closed 542 Hollywood Video stores and 378 Movie Gallery stores in the process. In May 2010the chain announced that it was planning to close and liquidate all of its remaining stores.
- Levitz: The Levitz Furniture chain filed for
Chapter 11bankruptcy protection (for the third time in ten years) in November 2007 and shortly afterwards began the process of closing its stores and liquidating its remaining inventory. Customers still holding Levitz gift certificates may have little recourse beyond filing claims against the company in bankruptcy court.
- Sharper Image: The Sharper Image chain of specialty retail stores filed for
Chapter 11bankruptcy protection in February 2008 and initially suspended redemption of Sharper Image gift cards and gift certificates. However, the company soon lifted the suspension, albeit with additional restrictions in place: Customers using those forms of payment had to make purchases worth at least double the value of their cards/certificates had to redeem them for their full value. Sharper Image
began liquidating all 184 of their outlets in
- Linens ‘n Things: In April 2008 news accounts began reporting that the
Linens ‘n Thingschain of housewares and bedding stores was considering seeking Chapter 11protection in the near future, but at the time the above-quoted message began circulating the company had so far delayed taking that step while it searched for a buyer. On 2 May2008, however, the chain finally filed for bankruptcy protection after failing to find an alternate solution to its financial problems, and in October 2008the chain began liquidating all 371 of it stores. Linens ‘n Thingsgift cards purchased prior to 17 October2008 are redeemable provided the holders can find still-open Linens ‘n Thingsstores at which to use them. (The cards cannot be redeemed online.)
Some versions of this list include mention of Bed, Bath and Beyond (BBBY), a retail chain which is the main competitor of
Linens ‘n Thingsin the housewares and bedding business, but BBBY is not known to be in immediate financial distress or contemplating filing for Chapter 11bankruptcy protection at this time. In fact, in April 2008rumors were floating that BBBY was considering purchasing 40 Canadian Linens ‘n Thingsstores which the latter company was seeking to sell off to raise cash and avoid bankruptcy.
- Circuit City: The Blockbuster movie rental chain made headlines in
April 2008when it tendered an unsolicited $1.35 billionoffer to buy the (money-losing) Circuit City chain of consumer electronics stores. Circuit City’s largest shareholder (HBK Investments LP)called upon the chain to put itself up for sale, but company officials rebuffed the Blockbuster offer, saying they didn’t believe the video rental giant could “consummate the proposed transaction in light of the difficult current financing environment.” In November 2008,Circuit City filed for Chapter 11 bankruptcy protection, but the chain continues to sell and redeem gift cards.
Last updated: 5 July 2010
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