Advice for consumers on store closings and bankruptcies

Published 9:17 pm Sunday, April 22, 2018

From Better Business Bureau serving Eastern North Carolina


RALEIGH — With the recent news of several big name stores closing or filing for bankruptcy, including Toys R Us and Claire’s, many consumers are left pondering what will happen to any unused gift cards, product warranties and goods they have yet to receive. When a business files for bankruptcy, it is often up to the consumer to collect what is due to them. Better Business Bureau serving Eastern North Carolina is here to offer advice to consumers regarding steps they can take if a retailer goes out of business, but doesn’t officially file bankruptcy, as well as what their options are when companies file Chapter 7 or Chapter 11 bankruptcies.

  • Chapter 7 Bankruptcies. Under Chapter 7 bankruptcy law, the money gained from selling the company’s assets goes first to back taxes, secured creditors and employees. If any assets are left over, they are divided among unsecured creditors, including customers who didn’t receive services or goods already paid for. Customers who paid with credit cards may be able to dispute the charge with their credit card company to get their money back. Others who paid by check or cash, will need to file a claim with the bankruptcy court administering the process. A creditor must file a proof of claim within 90 days after the first date set for the meeting of creditors.
  • Chapter 11 Bankruptcies. A Chapter 11 bankruptcy allows the company to continue operations while it reorganizes for future stability. If a company files for Chapter 11 protection, they will often still redeem gift cards, fulfill services and deliver on goods. Unfortunately, some Chapter 11 bankruptcies are unsuccessful and convert into Chapter 7, which leads to closure and complete liquidation. At that point, the chances for the consumer to receive any compensation are greatly diminished.
  • Gift Cards. When you purchase a gift card you are essentially giving the business a loan. If a company files for bankruptcy, payments are frozen and creditors must file claims in order to get paid. The court will then decide whether or not to accept gift cards and if so for how long. To avoid problems, BBB advises consumers redeem gift cards as soon as possible. Toys R Us customers have until this Sunday, April 15 to use any gift cards.
  • Warranties. The validity of any warranties will vary depending on the situation. 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 a retailer warranty.

Better Business Bureau serving Eastern North Carolina is a 501(c)(6) not-for-profit corporation serving 33 counties in eastern North Carolina. The organization is funded primarily by BBB Accredited Business fees from over 3,700 local businesses and professional firms. BBB promotes integrity, consumer confidence and business ethics through business self-regulation in the local marketplace. Services provided by BBB include reports on companies and charitable organizations, general monitoring of advertising in the marketplace, consumer/business education programs and dispute resolution services. All services are provided at no cost to the public, with the occasional exception of mediation and arbitration. Visit