Better Business Bureau warns gift buyers about retailers closing

The nation’s waning economy is giving consumers reason to pause as retailers go out of business, sometimes without warning.”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,” said Paula Fleming, vice president of communications and marketing for the Better Business Bureau in New England.According to Fleming, the current freeze on credit is having a serious impact on businesses. Bankruptcy filings by U.S. businesses rose 67 percent in September over the previous year, based on data compiled by Automated Access to Court Electronic Records.Some of the bigger names filing for bankruptcy in 2008 include A Sharper Image, Linens n’ Things, Lillian Vernon, Levitz Furniture and most recently Mervyn’s department store chain, she said.”Business bankruptcy filings increased 41.6 percent in the first half of this year compared to 2007, and the U.S. economy saw nearly 34,000 businesses go under,” she said. “In the wake of so many bankruptcies, and with many businesses pinning their hopes on the holiday season, customers have been and will most likely continue to be in the dark, wondering if they’ll ever get the goods they paid for or if the gift cards they are holding are even worth anything.”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 permanently close and liquidate any assets in order to pay creditors. If a business intends to continue operations under Chapter 11, it will often still redeem gift cards, fulfill services and deliver on goods;, said Fleming, adding that Chapter 11 bankruptcies, however, quickly turn into Chapter 7 and then the chances for the consumer to receive any compensation are greatly diminished.The Better Business Bureau offered consumers the following advice that consumers can take if a retailer files for Chapter 7 bankruptcy:Goods or Services DueBankruptcy 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, the 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 uscourts.gov.WarrantiesThe 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 CardsIn 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 bankruptc