Use Your Gift Cards Quickly from Companies Filing for Bankruptcy-Truth!
Summary of eRumor:
A list of U.S. companies that are going out of business—and a warning that you should use any gift cards from these companies quickly.
The Truth:
This eRumor began circulating in April, 2008.
It is true that some of these companies are facing tough times financially, but not all of them are going out of business. Bankruptcy sometimes means they are closing their doors. But sometimes it also means that they are reorganizing and intend to continue. Sometimes other companies may purchase them out of bankruptcy.
The Wall Street Journal said on April 28, 2008, that bankruptcy laws do not require companies to redeem gift certificates so a lot of consumers might end up with worthless cards. Not all the struggling companies are handling gift certificates the same way.
Let’s go through the list:
Hollywood Video
Hollywood Video’s parent company, Movie Gallery, announced plans at the end of 2007 to reorganize through bankruptcy. As of this writing Hollywood Video is still operating although a lot of stores have been closed as a part of the reorganization.
Levitz Furniture
Levitz is currently in the process of liquidating assets and the only advice the company has had for holders of gift cards is to file a claim in bankruptcy court. Consumers are usually the last in line when bills are being paid, however.
Sharper Image
Sharper Image filed bankruptcy in February, 2008, and for a while it stopped accepting gift cards. It later began accepting them again but customers needed to buy something worth double the card’s value and were required to use the full amount of the card.
Performance Team Freight
This company is not going bankrupt, does not do retail sales, and does not issue gift cards! We don’t know why it was included in this list. The company describes itself as providing third party logistics services to retailers and their vendors.
Linens ‘n Things
As of this writing, Linen’s ‘n Things has not filed for bankruptcy but there has been speculation about it because the company deferred an interest payment to lenders.
Circuit City
The company has not filed for bankruptcy. There was talk of selling the company to Blockbuster, in which case gift cards would still be usable.
The bottom line is that if you hear of a company going bankrupt, contact that company to find out the status of your gift cards.
Updated 4/30/08