What to do if your favorite store files for bankruptcy

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J.Crew, Neiman Marcus, JCPenney, Pier 1 Imports: these are just a few of the retailers that have filed for bankruptcy during the coronavirus pandemic.

Filing for bankruptcy doesn’t necessarily mean those stores automatically disappear, but sometimes the chains end up going out of business. And while you wait to see what happens to your favorite brands, you might be wondering how filing for bankruptcy affects you.

Because believe it or not, it is possible. If you’re in a chain loyalty club, have a credit card in store, or have returns to make, now’s the time to be careful.

Bankruptcy does not guarantee closure

A Chapter 7 bankruptcy is a complete liquidation of a business that is in the red. But more often than not, we hear about Chapter 11 business bankruptcies.

When a retailer files for Chapter 11, they don’t admit that they have to close. Rather, it’s about acknowledging that its finances are in bad shape and that the company wants to restructure its debt to make it more manageable.

Sometimes companies even go through the bankruptcy process more than once to restructure their debt a second time, which is sometimes referred to as “Chapter 22”.

But it could be some time before a retailer shuts down, if it ever decides to shut down.

“It is very important to note what type of bankruptcy a store has filed for, as well as what it plans next,” said Julie Ramhold, consumer analyst at DealNews.com. “Typically, when stores submit their case, they acknowledge their next steps soon after, if not at the same time. ”

If store closings are announced, Ramhold said he is taking details of the details. Some chains may close some locations and allow others to stay, while others will close their physical locations but keep their online store.

Do not accumulate your loyalty points or gift cards

If a store has filed for bankruptcy and it looks like closings are underway, take stock of any loyalty rewards or gift card balances you have. If you don’t spend them now, you may find yourself unable to redeem them.

“The more thorough the closing process [retailers] get, the less they will be able to accept these alternative payment methods, ”Ramhold said.

She explained how it worked when Toys “R” Us closed: it announced that customers would have one month to use outstanding gift cards.

If a chain does not close completely, you may still want to take advantage of the “free” money you have available for that retailer. This is because if the stores closest to you are closed, it might not be worth visiting a store further away.

And even in 2020, not all gift cards or store credits can be redeemed online.

Think strategically about your store credit card

When a store declares bankruptcy, you can usually continue to use your credit card, whether for regular purchases or for items purchased during a clearance sale.

But once the store is closed, there will be no benefit to having this credit card. And on top of that, it’s not as any remaining debt will disappear for you. The company that manages the card (a financial company, not the retailer itself) will continue to send you billing statements and collect your payments.

If you have a store card and choose to use it on a clearance, be sure to make a plan to pay it back as soon as possible to avoid high interest charges.

Don’t be fooled by shitty clearance sales

If the retailer shuts down for good, you can expect an “everything must go” style clearance sale, where you can usually buy anything that isn’t locked.

In this case, you can expect prices to drop in stages – 20% off, then 30% off, and so on – as the store gets closer and closer to closing. Of course, over the weeks the inventory will not be replenished, which means if you wait too long to get a good deal, you might miss your chance.

But if a retailer is closing some stores or switching to an online-only format, don’t expect fabulous sales. Yes, your local store can announce a closing sale, but they won’t be under the same pressure to unload their merchandise. Anything left over before its closing date can be sent to other locations that remain open or to the warehouse for online sales.

And whether the closure is in one location or the entire chain, pay close attention to the return policy, if there is one. Some locations may offer an abbreviated return period, while others may report all purchases made after a certain date as a final sale.



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