Spend those gift cards FAST! --A retail store's bankruptcy may leave you with an empty stocking

By Brad A. Brelinski Attorney, Curtis and Curtis Jackson, Michigan Did you receive a handful of gift cards in your stocking this year? If you did, you are certainly not alone. The popularity of gift cards has grown tremendously over the years, partially due to those hard- to-shop-for people on your gift giving list. In fact, according to reports, gift card sales in the United States for 2008 totaled about $70 billion. So why should you spend them fast? With the ever-growing number of retail bankruptcies (Sharper Image, Linens 'n Things, Circuit City, Steve and Barry's) and smaller stores simply shutting their doors, you could be out of luck and stuck standing at the end of a long line as an unsecured creditor. In a nutshell, with a gift card, you essentially loan the retailer money. They, in return, do not give you collateral to secure that loan. As an unsecured creditor, you are last in line to be paid out of any money available to creditors. It would not be unusual to receive nothing, or in a good scenario maybe pennies on the dollar, but that would likely be years later. When a store files for bankruptcy protection, there is no industry standard or hard line rule for dealing with unredeemed gift cards. Some stores continue to accept them (which Circuit City did before they announced they were liquidated), and some stores refuse. The attorneys general of some states occasionally step in on behalf of consumers to try and convince companies to continue accepting gift cards, but obviously they cannot always be effective. In an even worse case scenario, a smaller mom-and-pop store would simply shut its doors because bankruptcy can be prohibitively expensive, and then there would be no chance at redeeming your gift card except in the most unusual circumstances. We are not talking about chump change here. In 2008 alone, it was reported that consumers lost about $100 million in gift card value due to retailers going out of business. Don't take the chance and be left empty handed. Go out and spend those gift cards. Brad A. Brelinski is an attorney with Curtis and Curtis, P.C., a full service law firm in Jackson, Michigan. He can be reached at brad@curtiscurtislaw.com or 517-787-9481. Published: Thu, Dec 31, 2009

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