August 2008
Protect yourself if a store goes bankrupt
Illustration by Mark Matcho
When furniture seller Levitz closed last fall, its Web site informed customers that they might not receive ordered merchandise,
that there would be no more returns or exchanges, and that some paid-for extended warranties would not be provided.
With tough times forcing Levitz and other retailers—including Sharper Image, Linens ‘n Things, and Lillian Vernon—to file for bankruptcy protection, it’s wise for shoppers to take precautions. Here’s how:
When buying
After a bankruptcy
With tough times forcing Levitz and other retailers—including Sharper Image, Linens ‘n Things, and Lillian Vernon—to file for bankruptcy protection, it’s wise for shoppers to take precautions. Here’s how:
When buying
- Use a credit card, especially when leaving a deposit. If the business fails without providing your merchandise, you can dispute
the charge with the card issuer. You might also be protected if there’s a problem with the quality of goods for which you’ve
already been billed. You generally have less recourse if you paid with cash, a check, or a debit card.
- Spend gift cards. Use cards and certificates as soon as you can, even if there’s no reason to suspect the retailer is having financial difficulties.
After a bankruptcy
- Verify warranty coverage. Ask the store (or the provider of a third-party warranty) whether you’re still covered. The chance
of a business failure is just one reason to avoid extra warranty coverage for most products.
- File any claim with the manufacturer or retailer. If a retailer goes belly-up, you still might be able to make a warranty
claim with the manufacturer. If the manufacturer fails, you’ll probably have similar rights with the retailer. For more information
go to www.ftc.gov/bcp/edu/pubs/consumer/products/pro17.shtm.
- File with the bankruptcy court. Consumers are usually near the end of the list of creditors and won’t recover much during bankruptcy proceedings. But some consumers, including gift-card holders, might be able move ahead by applying as priority creditors. Check online for the name of the court where the company filed for bankruptcy. If the company simply disappeared, ask your local consumer protection agency for advice.
