As more businesses file bankruptcy, many consumers, who are also facing financially tough times, are finding themselves losing money on prepaid purchases, gift cards or even wondering about the validity of a warranty. Here are a few tips on how consumers can protect themselves when businesses file bankruptcy:
Avoid pre-paying for products/services sold by companies nearing bankruptcy. Sometimes a consumer who pre-pays for products/services sold by a bankrupt company may find that they are unable to recoup their money because the money and the product have been declared part of the company’s assets.
Conventional wisdom has said (until recently) that it was safe to buy gift cards from large retailers. But since the bankruptcy (and liquidation) of gigantic companies such as Circuit City and Shaper Image, the new advice is to use gift cards as soon as they are purchased and avoid purchasing gift cards from companies that are nearing bankruptcy. If a consumer is holding a gift card of a bankrupt company he/she runs the risk of losing the money on that card.
When making large purchases such as a new car, it’s important to make sure that the company will honor the warranty even if they enter bankruptcy. It’s important to carefully review any warranty you receive especially on large purchases with companies who may be nearing bankruptcy.