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When a Business Declares Bankruptcy, What Happens to its Customers with Unused Credit?

Posted on in Bankruptcy
When a Business Declares Bankruptcy, What Happens to its Customers with Unused Credit?

In early 2015, long-suffering retailer RadioShack filed for Chapter 11 bankruptcy. As part of the bankruptcy protection deal, it agreed to sell a significant portion of its stores to Standard General, a major shareholder that plans to continue to operate them as RadioShack-branded stores with Sprint shops within them. The remaining stores will be sold. This is coming after 11 consecutive quarters of posting losses. Along with the auction and purchase of the company by Standard General and closure of thousands of RadioShack stores, many consumers who have unused gift cards found themselves shortchanged.

These customers will be taken care of. Individuals who have unused RadioShack gift cards can redeem them for money at www.oldradioshackgiftcard.com. Customers who have unused credit at the store were given first priority in the company's bankruptcy proceedings, as ordered by the bankruptcy court. If you have an unused RadioShack gift card or other questions or concerns about unused credit with this or another bankrupt retailer, speak with an experienced bankruptcy attorney to have your questions answered.

What Will Happen to RadioShack?

RadioShack has been a part of the American retail landscape since 1921. Currently, the stores that were not closed on February 1, 2015 (the company's first day of the new fiscal year), remained in operation as the company moved through the bankruptcy proceedings. In May 2015, the sale was finalized for a total of $26.2 million.

Initially, customers with unused gift cards had only until March 2015 to use them. Giving them a longer period of time and the option to redeem them through the website came after Attorneys General from multiple states pressured the company to provide these options. In a similar vein, the company was criticized for selling its customers' personal identification information as an asset in the bankruptcy petition, despite promising customers when the data was collected that it would not be sold for any reason. Although the Attorneys General fought this too, the sale ultimately went through.

RadioShack's future is unknown. Currently, the stores that are in operation are doing so in a partnership with Sprint. In our often brutal retail economy, one public misstep can tarnish a brand's reputation for years or even decades. Time will tell if RadioShack will be able to recover from news of its sale of customers' personal information or if giving them the option to redeem unused gift cards was enough to make up for this lapse.

Illinois Bankruptcy Attorneys are Here to Help

Bankruptcy can be complicated and in many cases affects far more than just the bankrupt party. In the case discussed above, potentially thousands of individuals could have lost money through no fault of their own in the RadioShack bankruptcy case. If you are in a similar situation, you could have options. Contact our team of experienced bankruptcy attorneys at Newland & Newland, LLP today to schedule your free legal consultation with our firm and learn more about your rights as a consumer.

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