Steve Wybo Comments on Retailer Gift Cards Following Bankruptcy
Detroit Free Press article features insights from Steve Wybo on gift card status once the retailer files for bankruptcy.
When a retailer drapes the going-out-of-business sign, what happens to your gift cards?
Well, the answer would depend on the retailer.
Wet Seal, which sells trendy clothes to teens and young women, filed for Chapter 11 reorganization in early 2015. The chain has since been bought and the new store owner is honoring outstanding gift cards, which is great news for consumers but something that rarely happens.
By contrast, RadioShack has received bankruptcy court approval to sell its brand for $26.2 million to hedge fund Standard General. And while stores remain open, don’t try walking in and using a RadioShack gift card.
“The name may be worth a great deal of money but right now the gift card is not,” said Shelley Hunter, who is known as the Gift Card Girlfriend and has a blog at GiftCards.com.
RadioShack accepted the gift cards through the end of March but stores are no longer accepting old gift cards.
Hunter has created a Chapter 11 Gift Card Watch List. The list can help consumers figure out what’s happening to their gift cards as retailers undergo restructuring.
Some people can still run across an old Borders gift card and wonder whether they can spend it somewhere. They can’t.
Paying attention to your gift cards isn’t quite as essential as balancing a checkbook or carefully studying each charge on credit card statements. But it’s wise to take time to review what gift cards you have and spend them before a store hits the financial skids.
As a general rule, my family digs through the gift card stash during the summer to stretch a vacation budget. Why not take a restaurant gift card on the road and limit how much you need to spend in cash on a trip?
It’s bad enough, of course, that consumers often tuck gift cards into sock drawers or cabinets and never redeem them or they somehow just flat-out lose them.
But this year’s shake up in the retail landscape has proven once again that it is necessary to adopt a use-it-or-lose-it policy with some gift cards.
This spring, Dots Fashion stores are seeing what we’d call going-out-of-business déjà vu.
A group of Dots stores had going-out-of-business sales last spring. But then a new owner bought the Dots name and reopened some stores. Now some of those stores are closing. Simply Fashion, which bought the Dots name, is shutting down and so are the Dots stores.
A Dots store at Eight Mile Road and Woodward Avenue in Detroit had its going-out-of-business signs up in May and was still accepting gift cards early this week.
But experts warn shoppers could have only a few weeks to go to take advantage of their gift cards.
“These things can change at any point,” warned Hunter, the Gift Card Girlfriend.
Grand Rapids-based Family Christian Stores filed for Chapter 11 bankruptcy restructuring in February. Family Christian said earlier that it does not expect to close any stores and planned to honor its gift cards. Family Christian Stores has 266 locations in 36 states.
Using the card soon after you receive it is the best option. If you hear of financial woes, use the gift card quickly before the chain stops accepting them.
File a bankruptcy claim
If you can no longer use a gift card at a retail chain in Chapter 11, you might have another long-shot option, too.
In some cases, a consumer can file a claim with the bankruptcy court regarding unused gift cards if they’re within a given deadline. Some consumers could want to do that with their gift cards from RadioShack, women’s retailer Cache and others.
Steven Wybo, senior managing director for Conway MacKenzie, a Birmingham-based turnaround and restructuring management company, said how much a shopper would receive in bankruptcy for a gift card would depend on the amount of proceeds that would be available to the unsecured creditors.
In some cases, experts say, it could be pennies on the dollar or not even that.
The Gift Card Girlfriend has links on her bankruptcy watch list to some bankruptcy claim information for specific retailers.
In some cases, it’s possible a competitor will honor a card if another retailer filed for bankruptcy, according to the Better Business Bureau. But again, that’s a case-by-case issue.
It’s not just the big bankruptcies that cause consumers trouble, either.
The Better Business Bureau Serving Eastern Michigan and Upper Peninsula has received complaints on gift cards for small, local stores, too. Some spas and nail salons close suddenly, leaving customers for $50 or $60 gift cards that they can no longer use.
Or a chain restaurant closes its only location in an area leaving customers wondering if they now must drive 100 miles to use that gift card.
Again, best bet is to use a gift card if you can soon.
Hunter, the Gift Card Girlfriend, says consumers don’t have to wait for a retailer to file bankruptcy to move quickly. She’s even recommending that shoppers use their gift cards for stores like Sears, JCPenney and Aeropostale, which face some challenges but have not filed for bankruptcy restructuring.
“It’s May right now and I know people are still holding onto their gift cards from the holidays,” Hunter said.