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Working With A Bankruptcy Professional

A few years ago, when I realized that I couldn't pay my mortgage anymore, I knew that I needed to do something to correct my finances. It seemed like I just couldn't catch a break, and after losing my job, I knew that I was in trouble. I started looking for new work, but I knew that I needed to fix my credit somehow. I was at the end of my rope, until a friend talked with me about the possibility of declaring bankruptcy. She explained that it helped her to start over. I met with a bankruptcy attorney who was incredible to work with, and I was amazed at how much it helped my situation. Check out this blog to learn how working with a bankruptcy professional could help you.


Working With A Bankruptcy Professional

Seeking Redemption: Do You Have To Honor Customer Gift Cards Under Chapter 11 Bankruptcy?

by Roël Schiks

How your business handles outstanding gift cards and gift certificates during a Chapter 11 bankruptcy reorganization depends on the court's orders, and not on whether you want to retain the goodwill of your customers and the general public. If you plan to keep your brand on the market, it makes sense to honor gift cards. If you plan to liquidate, there's not as much incentive unless you're compelled to do so by the courts.

If the Court decides the gift cards are a priority.

If the gift card holder is determined by the court to be a "priority" debtor under Chapter 11, you will have to honor gift cards even if your brand is liquidating. Some courts accept a reorganization status of "unsecured debtor" when it comes to gift cards issued as refunds or promotional giveaways.

You may petition the court to allow your business to continue honoring the cards, because it really does make good business sense if you want your brand to remain viable. Many people will spend more than the card's value, which is good for your till, and customers see no interruption of service or value. But the court may deny your request and deem the gift cards a non-priority debt.

Next time, plan ahead.

If you're caught with a substantial amount of unexpired, unused gift cards and you're filing Chapter 11, you already know something went wrong. You received cash in exchange for nothing, and you are still in financial strain.

Figure out your cash flow problems, but also be sure to protect yourself by placing a legal expiration date on all gift cards. The federal minimum is 5 years before a card expires, and your state may have stricter laws. So consult an attorney, like Richard S. Ross - Bankruptcy Attorney, before you set limits in stone. Don't ever sell or give away non-expiring gift cards unless the law mandates it.

Collect and safely store contact data for gift card purchasers and recipients if possible. This allows you to communicate with customers to make announcements and issue alerts related to their gift cards and shows a good faith effort to be transparent. Legal public notice may be required in some Chapter 11 plans.

Creative solutions for gift card redemption.

You can preemptively call back a significant number of gift cards by offering special promotions if allowed in your case. The important thing is to be fair to gift card holders without jeopardizing your own precarious financial position.

Redeem their value by offering steep discounts on a limited selection of items. Offer a trade-in for 10% of value in cold, hard cash. Hold "gift card holders only" sales events where you liquidate merchandise and get cardholders to turn in cards at the same time.

You could throw a big bash with an open bar, all-you-can-eat buffet, and door prizes. If you're a juvenile retailer, scratch that and have unlimited ice cream sundae bars, inflated castles, and pony rides. Guests are granted entry by surrendering unused gift cards. Don't scoff. Many retailers have tens of millions of dollars in unexpired gift cards floating around out there. A big party won't cost even a drop of that.

Discuss all of your company's Chapter 11 strategies with a knowledgeable attorney who knows the ins and outs of bankruptcy law in your state and your industry.