The coronavirus pandemic has taken a huge toll on the U.S. economy. And the sad reality is that many businesses have been forced to close or are struggling to survive.
In this article, we’re going to give you an action plan to follow when a retailer you love has filed for bankruptcy or is going out of business.
Take These Steps If Your Favorite Store Is Going Out of Business
Filing for bankruptcy is usually the first public sign that a store or retail chain might be going out of business soon — but not always.
“Bankruptcy alone doesn’t necessarily mean the business is going away,” money expert Clark Howard says. “In the past, a retailer would file for bankruptcy, and they’d close their unprofitable locations. And then they’d come out of bankruptcy eventually and would resume doing business.”
Toys R Us and Sears are just two examples of major retail chains that have gone through bankruptcy proceedings and re-emerged as smaller companies.
But Clark says the conditions caused by the pandemic are making it more difficult for weak companies to survive. “This time, it’s much more likely that these stores that have filed for bankruptcy are going to close forever,” he says.
Here are some steps you need to follow if your favorite store files for bankruptcy.
1. Find Out the Rules on Your Store Credit Card
If you have a store-branded credit card, find out if the company’s financial situation is changing what the card offers. For instance, the store rewards program associated with the card may go away if the business gets into financial trouble.
Also, if the store is in really bad shape it may begin to accept only online purchases. Because every company’s circumstances are different, it’s best to check with the store for specific information.
2. Use Your Gift Cards Immediately
If you have any store gift cards, Clark says you should spend them in a hurry.
“So many people have gift cards lying around and with the fatality rate on retailers being so high, you need to use those gift cards quick. Because gift cards don’t get better with time.”
3. Get Deals Before Liquidation Begins
When people hear that a business is in trouble, they often wait for the going-out-of-business sale to try to grab some deals. Clark says if you wait until then, you’re probably already too late.
“When they do fail and they have their going-out-of-business sales, it’s not the same business anymore. I don’t ever go to going-out-of-business sales because the sales are usually handled by specialty liquidator companies, and the merchandise mix will change over the weeks of the liquidation sale.”
Clark says another deception is that many of the things you find in a liquidation sale will be items that the store never even sold!
“So, know that when a store is done — they’re closing all their locations — you can have your own personal grieving time for that store, but know that there’s no benefit of going in typically to shop at that going-out-of-business sale.”
The bottom line: If your favorite retailer is in trouble, there are some steps you can take so you don’t lose money.
Clark always recommends using store gift cards as soon as you can. But that advice is especially important right now:
“Usually gift cards are protected in a bankruptcy if the store intends to continue operating,” Clark says. “What’s been different this year is that stores have been much more likely to file for bankruptcy and then decide they’re just going to close completely forever.”