SUMMARY: Email flier lists several companies that have supposedly filed for bankruptcy, warning that gift cards from these businesses won't be valid for much longer.
Description: Email rumor
Circulating since: April 2008
Status: Partly true
NOTE: A new variant of this message circulating since Nov. 2008 lists a large number of store closings attributed to the economic recession.
Variant #1:
Email example contributed by Cyndi W., April 24, 2008:
FW: Companies that have recently filed for BankruptcyFYI....
The following companies just filed for Bankruptcy:
Hollywood Video
Levitz
Sharper Image
Performance Team Freight
Linens n Things
Circuit CityIf you have gift cards from the above list use them ASAP, they will not be valid for much longer.
PASS THE WORD.
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Variant #2:
Email example contributed by an AOL user, April 30, 2008:
The following companies just filed for Bankruptcy
Hollywood Video
Levitz
Sharper Image
Performance Team Freight
Linens n Things
Circuit City
Bed, Bath and BeyondIf you have gift cards from the above list use them ASAP, they will not be valid for much longer.
PASS THE WORD.
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Comments: Not all of the companies listed above have filed for bankruptcy. Hollywood Video's parent company, Movie Gallery, did in October 2007; Levitz did in November 2007; Sharper Image did in February 2008; and so did Linens 'n Things, in April 2008.
As of this writing (May 2008), Performance Team Freight Systems, Circuit City, and Bed, Bath and Beyond have not. (UPDATE: Circuit City filed for chapter 11 bankruptcy on November 10, 2008.)
In the case of those companies that have declared bankruptcy, the status of any outstanding gift cards or certificates will vary. The law does not require them to be honored. Levitz, for example, has stopped accepting gift cards altogether and recommends that holders file claims in bankruptcy court. Linens 'n Things has announced it will continue to honor gift cards at all of its nearly 600 locations. At last report, Hollywood Video was also continuing to accept gift cards and gift certificates under the terms of its restructuring plan, though it is also expected to close many of its outlets. Sharper Image stopped accepting gift cards temporarily after its filing but is now redeeming them on the condition that they are used to purchase goods totalling at least twice the cards' face value.
With more companies expected to file for Chapter 11 protection in 2008, experts quizzed by the financial news website TheStreet.com offered this advice: "behave as though every company is about to go belly up" -- meaning take your gift cards out of the drawer and spend them as soon as possible. A card that's worth $50 today could be worth nothing tomorrow.
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Sources and further reading:
What to Do with Your Gift Card When a Store Goes Bankrupt
TheStreet.com, 21 April 2008Don't Hoard Gift Cards
Wall Street Journal, 20 April 2008Linens 'n Things to Honor Gift Cards
Business Week, 5 May 2008Levitz Furniture Files for Bankruptcy
ABC News, 27 November 2007
Last updated: 11/10/08
