Circuit City goes bankrupt: What it means for you

With 721 stores, Circuit City has been among the nation's top electronics chains, especially in categories like LCD TVs, where only Best Buy and Wal-mart sell more sets. The announcement that the company has filed for Chapter 11 bankruptcy protection and plans to close 155 stores might have you wondering what it all means to you.

The good news for consumers is that Circuit City has asked the bankruptcy court for authority to honor gift cards, as well as returns and exchanges. Authorization, the company said in an FAQ, "normally is granted." Still, if you have a gift card to use or a return to make, do it fast, because there's no way to tell what will happen down the road.

The stores scheduled to close began holding clearance sales last Wednesday; the company expects them to finish up "no later than the end of the calendar year," though with the poor economy there's no telling how quickly marked-down items will be scooped up. Circuit City will continue to operate 566 stores in 153 U.S. markets. You can also shop online (www.circuitcity.com) or by phone (1-800-843-2489). In any case, if you buy something, assume that all sales are final.

Indications are that Circuit City credit cards will be unaffected and warranties on products bought at Circuit City will be honored.  A "letter to guests" on the company's investor Web site assured customers that warranties are provided by a third party not impacted by the Chapter 11 filing. However, we echo our usual advice that buying an extended warranty doesn't make financial sense for most consumers, and that's especially true in this situation.

For more information on how to deal with a bankrupt business, see our video above, check out our advice on ConsumerReports.org, and visit Tightwad Tod's blog on the subject.

—Nick K. Mandle

UPDATE: Nov. 13, 2008

As a commenter has correctly noted, I should have more strongly cautioned readers about the hazards of shopping at liquidation and clearance sales, such as those being offered at Circuit City's closing stores.  Going-out-of-business sales can be lucrative for the retailer seeking Chapter 11 protection and actually raising prices on products (in order to meet the store's creditors' crunch) is not uncommon. Consumerist.com has it from a "disgruntled" Circuit City employee that "TVs are 10% off the MSRP" at a closing store, "but in many cases Circuit City was already selling them for 30% off the MSRP."

Consumers hunting for true bargains at liquidation sales should venture in with some skepticism. Here's what we recommend:

• Check for complaints. Phone the local Better Business Bureau or state consumer agency and ask about the liquidation sale.
• Haggle. The salespeople need to sell the inventory, so don't settle for the first price.
• Comparison shop. Write down model numbers and check prices with competitors both online and in the area. Include shipping, delivery, and setup charges.
• Check for a warranty. Ask to see the product warranty to learn whether you'll be covered if something goes wrong.
• Pay with a credit card. You'll have more standing to get a refund than if you pay by cash, check, or debit card.
• Assume sales are final.

For more more tips, see our report on "How to protect yourself if a store goes bankrupt."

As always, caveat emptor.
—NKM