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Chapter 11 Bankruptcy Gift Card Watchlist for 2022

Stores that are going out of business or have recently filed for bankruptcy and what that means for their gift cards. Gift cards to use ASAP in 2022.

Post updated 2/17/2022

The Bankruptcy Gift Card Conundrum

charming charlie storefront

What Happens to Gift Cards When a Store Files for Bankruptcy?

When a store or restaurant files Chapter 11, the business goes through a reorganization process where they must develop a plan to repay creditors and, if possible, return to profitability. The plan, and each action taken within the plan, must be approved by the bankruptcy court covering the case. Although the hope is that the business will be saved, other scenarios can occur such as shutting the doors completely, selling the company as a whole or selling parts of the company to a new owner.

The problem for consumers is that when a company is in this type of financial trouble, outstanding gift cards become just as vulnerable as the business itself. In fact, the cards are often deemed immediately useless even though stores are open and merchandise remains on the shelves. While some companies ask the courts for permission to continue accepting gift cards during bankruptcy proceedings, some don’t and others only ask for permission to accept the cards for a limited period of time.

Consumers who miss the opportunity to use their gift cards before decisions are made often find their cards are worthless or they must file claims in order to join the list of creditors wanting their money back.

READ: More on What To Do with Gift Cards to Stores in Bankruptcy.

 

Gift Cards in Critical Condition

toys r us in chapter 11 bankruptcy

I always advise using gift cards immediately because the longer you hold onto a gift card, the higher the likelihood that you’ll lose the card or forget to use it. When a store is in financial trouble, the urgency is even greater. Below is a list of stores currently in Chapter 11.

Please note. I am not a lawyer and cannot offer legal advice. I am simply reporting what I learn about gift cards impacted by bankruptcy.

MerchantGift Card Impact
Sears
  • 10/15/18 – Sears files for bankruptcy through Chapter 11 and announces plans to close underperforming stores.
  • 4/10/2019 – Deadline to file a claim. Submit Sears Gift Card Claim
  • 1/21/2022 – Parent Company (Transformco) issues press release saying that “Transformco’s go-forward strategy for Sears and Kmart is to operate a diversified portfolio consisting of a small number of larger, premier stores with a larger number of small format stores…”
  • As of this writing, Sears is still selling gift cards. I could not find information on gift card redemption.

Gift Card Girlfriend Note: A company that appears on the Watchlist is currently in or has recently filed for Chapter 11 bankruptcy protection. When a store emerges from bankruptcy and continues to accept previously-issued gift cards, the store will be removed from the Watchlist. If the store closes or restructures but no longer accepts previously issued gift cards, the company will be moved to the Gift Card Graveyard when the bankruptcy case is closed. This list is updated frequently as bankruptcy news is received. If I have missed anything, please leave a comment below.


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RIP: The Gift Card Graveyard

borders bookstore photo credit: Borders Book Bankruptcy via photopin(license)

When a merchant files for Chapter 11 Bankruptcy, there is a possibility that the store will recover. But there is also the possibility that the store will be shutdown or that a new owner will take over. In either of the latter cases, outstanding gift cards may suffer an early demise, leaving gift card holders to mourn the loss of millions of dollars. Below is a list of gift cards that are defunct as a result of restructuring.

MerchantTimeline of Death
Modell’s
  • 3/11/2020 – Modell’s files for bankruptcy. Plans to close all stores.
  • 10/30/2020 – Deadline to file a claim. Modell’s claim form.
  • 9/23/2020 – Modell’s formally closed all brick and mortar stores and transferred ownership to an online-only model under a new owner. New Modells.com will not honor legacy gift cards.”
Barneys
Charming Charlie
Dressbarn
Charlotte Russe
Munchery
Shopko
Payless Shoe Store
Gymboree
  • 1/16/19 – Gymboree files for bankruptcy. Plans to close all stores.
  • 2/15/19 – Deadline for using Gymboree gift cards announced. If you missed the chance to use your Gymboree gift card before the deadline, file a claim with Gymboree’s bankruptcy handler. File a claim with Gymboree.
Brookstone
Toys R Us
Family Christian Stores
Wet Seal
Gordmans Stores
  • 3/13/2017 – Gordmans Stores files for bankruptcy. Stage Stores wins bankruptcy auction and will keep 50 stores open.
  • 11/6/2017 – Gordmans bankruptcy over with final plant to liquidate all assets.
Gander Mountain
Vanity
American Apparel
The Limited
  • 11/28/2016 – The Limited stops selling gift cards.
  • 1/7/2017 – The Limited stores nationwide are officially closed.
  • 1/18/2017 – TheLimited.com website is shut down and the company files for bankruptcy.
  • 1/17/2017 – The Limited stops accepting gift cards.
  • With stores closed and website down, gift card holders are forced to file claims. Limited Gift Card Claim.
  • 2/21/2017 – Sycamore Partners wins bankruptcy auction for The Limited.
  • 10/20/2017 – TheLimited.com website reopens but company no longer accepts previously purchased The Limited gift cards.

Per an email from customer service on 3/14/2018, “Please note that Limited Stores, LLC, (“Old Limited”) filed for protection under Chapter 11 of the United States Bankruptcy Code in January 2017. As part of bankruptcy proceedings, The Limited LLC (“New Limited”) acquired The Limited brand name and intellectual property. New Limited has no affiliation or association with Old Limited and, unfortunately, cannot accept gift cards, credit cards or any returns of product sold by Old Limited.”

GolfSmith
Hastings
Sports Chalet
  • 4/16/2016 – Sports Chalet announces it is closing all stores. The company has not filed for bankruptcy protection, but is going out of business.
  • 5/31/2016 – Sports Chalet gift cards are accepted through May 31, 2016.
  • 7/29/2016 – Per the Sports Chalet website, customers who are unable to visit Sports Chalet before May 31, 2016 are invited to transfer gift card balances to a gift card from Eastern Mountain Sports or Bob’s Stores through July 29th, 2016.
Sports Authority
Hancock Fabrics
  • 2/2/2016 – Hancock Fabrics files for chapter 11.
  • 3/31/2016 – Hancock Fabrics announces all stores will be closed.
  • 8/5/2016 – Michael’s purchases Hancock Fabrics. Gift Cards not part of the sale.
City Sports
  • 10/5/2015 – City Sports files for chapter 11.
  • 2/26/2016 – Two brothers who bought the City Sports website and logo out of bankruptcy announce plans to reopen City Sports as a website.
  • 8/4/2016 – Gift card holders file lawsuit against City Sports to be considered priority claim. Denied.
  • At time of lawsuit, the estimated value of outstanding City Sports gift cards is $1.2M (per lawsuit details).
A&P Supermarkets
Dots, Simply Fashion Stores
RadioShack
C. Wonder
Anna’s Linens
Cache
SkyMall
  • 1/23/2015 – SkyMall files Chapter 11.
  • 4/1/2015 – C&A Marketing buys SkyMall out of bankruptcy.
  • Per customer service, “The former ownership of SkyMall filed for bankruptcy in early 2015. We, the new ownership, purchased SkyMall in name only and, per the terms of the purchase, did not acquire any liabilities associated with the former ownership. Gift cards that were purchased under the previous ownership are not being honored.”
dElia’s (dELiA*s)
Deb Stores
  • 12/4/2014 – Deb filed Chapter 11
  • 1/8/2015 – Going-out-of-business sales at all locations. According to store officials, Deb stopped selling gift cards when the going-out-of-business sale began on 1/8/2015.
  • 3/8/2015 – Deb stopped accepting gift cards.
  • 5/4/2016 – DebShops reopens as an online store.
Coldwater Creek
  • 4/11/2014 – Coldwater Creek filed for Chapter 11, but allowed customers to use gift cards throughout process.
  • Store bought out by new company that kept name and website, closed stores.
  • According to new company website, “Coldwater Creek in its original incarnation went through the bankruptcy process, which makes it impossible to honor any financial agreements with the previous company.”
  • Est. $6.5M at time of filing.
Borders
  • 2/2011 – Borders filed for Chapter 11, but allowed customers to use gift cards until last day of going-out-of-business sale.
  • 6/1/2011 – Courts set deadline for filing claims but company did not notify gift card holders that they had to file claims to receive payment for outstanding gift cards. No gift card claims were filed. When group of customers complained after deadline, courts said it was too late.
  • Barnes and Noble acquired some of Borders assets as well as their trademark and customer lists, but would not honor outstanding gift cards.
  • 10/31/2014 – Group of jilted Borders gift card holders fight to get cash back for unused gift cards. Courts again rule unredeemed Borders gift cards are worthless.
  • Est. $210.5M
Linens ‘n Things
  • 5/2/2008 – Linens ‘n Things filed for Chapter 11. The store allowed gift cards to be used, but also continued to sell gift cards up until three days before the stores closed for good.
  • Gordon Brothers Group bought business, retained name and website, but closed physical locations.
  • New LNT.com website says, “We are sorry, but we cannot accept gift cards issued by Linens N’ Things (“LNT”) prior to February 15, 2009.”
The Sharper Image
  • 2/19/2008 – Sharper Image filed for Chapter 11, deeming all outstanding gift cards unusable.
  • About a month later, store allowed gift card holders to redeem gift cards if they spent double the amount of the card.
  • 6/8/2011 (3 years after the initial filing) – Company allowed gift card holders to file claim to be compensated for unused gift cards. Those who could provide documentation of having a gift card took priority over those without documentation.
  • Sharper Image website in operation today is not the same company as the former store, thus gift cards purchased at the stores will not be honored. Only egift cards ordered from the website after January, 27, 2011 are accepted.
  • Est. $19M before claims accepted in 2011

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Tips on Filing a Gift Card Claim

how to file a gift card claim

If you decide to file a claim for a gift card to a store that is in bankruptcy, the most important thing to remember is that you are filing an UNSECURED CLAIM. Knowing which type of creditor you are in bankruptcy is important.

In simple terms, you are an unsecured creditor in a store’s bankruptcy case because the store did not give you any collateral (other than a piece of plastic or possibly a digital egift card) when you bought the gift card.

Although there is often a claim deadline in which you should file a gift card claim for a store in bankruptcy, my advice is to file the claim even after the deadline has passed and to hold onto the gift card (or a picture of the front and back of the card) even after you have filed the claim. I offer this advice because I called a claim processor once who told me that you should always file a claim. Although it is unlikely you will get any money back from the gift card, if there is money left after the other claims have been processed, there is a small possibility that you will be reimbursed. I will take that small possibility over no possibility if you never file the claim.

Remember: Your gift card claim of $50 or so is a small drop compared to a huge bucket of million-dollar debts owed by the company going under so please do not file a claim expecting to get your money back quickly or at all. But like I said, to me it is still worth doing.


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Gift Card Holders Need Protection

I normally only see the good in gift cards, but this situation has caught my attention. I understand shutting down stores. I understand that gift cards can’t be used once a store goes out of business. But I don’t understand why outstanding gift cards can’t be used when a store continues to operate–even if that operation is under the direction of a liquidation company. As long as the doors are open and there is inventory to buy, consumers who have already given the store money in exchange for merchandise should be allowed to collect. (Since statistics consistently show that shoppers with gift cards overspend the value of their gift cards, the liquidation company has the opportunity to move more merchandise by accepting outstanding cards than not.) If the business does eventually close, I believe the courts should treat gift card holders as a group of creditors who are collectively owed several million dollars versus a bunch of individual creditors owed a small sum. (Radio Shack is said to have $44 million in outstanding gift cards.) While I’m not ready to go “Legally Blonde” on this issue, I do think some type of reform is in order. Anybody else?

If you know of other gift cards in jeopardy, add your comments below or reach out to me on Twitter (@GCGirlfriend).

Happy Gift Carding!

~Shelley Hunter, Gift Card Girlfriend

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