REUTERS/Kamil Krzaczynski
After a retailer files for bankruptcy, one of the first questions that consumers might have is what to do with any unused gift cards.
The best thing to do is to use those gift cards right away, according to Darren Azman, a partner at McDermott Will & Emery, a law firm that works with financially distressed companies.
Azman said that most retailers will try to honor gift cards throughout the bankruptcy process, as it helps them to maintain goodwill with their customers.
"That goodwill is easily lost, as you can imagine, when you start telling customers they have 30 days to use their gift card or some other type of limitation," he said.
Some limitations do arise in cases where the retailer is liquidating and positive feelings towards the brand don't matter as much as paying back creditors.
Papyrus, for example, which filed for bankruptcy in January and subsequently closed all of its stores, only allowed customers to redeem gift cards for 30 days following its filing.
According to Azman, even if a bankrupt retailer says it will continue to honor gift cards at the beginning of its restructuring, there's not much keeping it from going back to the bankruptcy court and requesting to change course later.
"The other level of uncertainty is just the inventory: Is the retailer going to have the product that you still want in two months, three months, when you get around to actually use the gift cards, or are they going to have liquidated their inventory? And there's going to be very, very few things left on the shelf," he said.
Ultimately, the onus is on the shopper to be fully informed about stores' policies so that they don't end up with a useless piece of plastic.
And with Lord & Taylor, JCPenney, Neiman Marcus, Brooks Brothers, and Ascena Retail Group already having filed for bankruptcy amid the coronavirus pandemic — with more likely on the way — staying up-to-date on store policies is going to be more important than ever.
