Business Closure: What Can Consumers Do?

When a business closes or files for bankruptcy, consumers often have questions about what happens next. While large companies often continue business operations during a closure or bankruptcy, smaller companies may shut their doors without warning. For consumers hoping to protect themselves, their money, or their property, timing is of the essence.

If a Business Has a Consumer’s Property

Consumers sometimes leave their property with a business (like clothes at a dry cleaner, a car at a mechanic shop, or a computer at a repair shop). In the event of bankruptcy or closure, consumers should try contacting the following people to help them retrieve their property:

· The business owner or manager may be able to return property directly to consumers.

· If the business is a franchise, the franchisor.

· The bankruptcy trustee may make arrangements for storage and retrieval of property.

· Local or state officials.

· In extreme cases: A consumer may be able to file an adversary proceeding in the bankruptcy case to regain possession of their property.

If a Business Has a Consumer’s Money

Consumers put down deposits or down payments with businesses to reserve their product or service (examples: lodging, event venues, home improvement contractors). Getting the deposit or down payment refunded by a closing business depends on many factors – and often there is no easy way to know. Consumers should review their contract for details on the business’s obligation if it closes or is unable to fulfill its end of the agreement. Then they should contact the business and/or bankruptcy trustee right away with any questions or requests, and ask for details in writing. If the payment was made by credit card and posted to their statement within 60 days of closing – quickly contact the credit card company to file a dispute.

If a Consumer Has a Gift Card from a Closing/Bankrupt Business

Some businesses voluntarily decide to honor gift cards after announcing closure, so consumers should ask an employee or check the business’s online announcements, press releases, or FAQ webpages as soon as possible. In bankruptcy cases, how a business handles gift cards could be up to the courts.The best way for a consumer to protect themselves is to avoid the problem entirely and use gift cards right away. Holding onto a gift card for a long time increases the risk a consumer could lose the card, its balance could be drained by a scammer, or that the business could stop accepting them.

Bankruptcy

When a company files for bankruptcy, its business affairs come under the jurisdiction of a bankruptcy court. The court will usually appoint a trustee to oversee the case, who has authority to manage many of the affairs of the business and in some cases, dispose of business property.

Bankruptcy often results in creditors receiving only a portion of what they are owed, depending on the company’s available assets. That’s why timing is critical.

In all cases, consumers affected by a business’s bankruptcy should:

· Contact the bankruptcy court and obtain information on how to file a proof of claim and deadlines for submission.

o The contact information for more details about all U.S. bankruptcy courts can be found by using the Find a Federal Court search on uscourts.gov.

o Official forms, including the Proof of Claim form (Form B 410) for filing a claim, can also be found on uscourts.gov.

o Pay close attention to deadlines, including for filing a claim. Failing to file before the deadline could mean a consumer loses their right to compensation.

· Monitor the bankruptcy proceedings to stay updated on the case’s progress and any developments that may affect their claim.

o Consumers can subscribe to bankruptcy court notifications or search court records manually. Those filing a claim may also need to participate in creditor meetings.

· Seek legal advice with an attorney specializing in bankruptcy law.