Less than a month ago I posted here about the possibility of the bankruptcy of the venerable Sears, Roebuck & Co. Today's word of warning has to do with a relative new kid on the block, Toys 'R Us. Read about its potential Chapter 11 here.
I plan to follow either or both cases if they happen because I have a peculiar interest in inventory financing.
If you happen to have a Sears or Toys 'R Us gift card, don't despair. Every significant retailer that has filed for relief under Chapter 11 has received approval from the Bankruptcy Court to honor gift cards. Technically, holders of gift cards are mere unsecured creditors. The Bankruptcy Code, however, provides that the claims of such folks have a priority (up to $2850) over most other unsecured creditors.
Of course, even priority claims are subordinate to the property-based claims of secured creditors but it's a rare secured creditor that would want the publicity that would come with flushing gift card holders down the drain. There is thus no need to go out and spend that gift card immediately, although I'm sure Sears and Toys 'R Us would be pleased if you did.
I plan to follow either or both cases if they happen because I have a peculiar interest in inventory financing.
If you happen to have a Sears or Toys 'R Us gift card, don't despair. Every significant retailer that has filed for relief under Chapter 11 has received approval from the Bankruptcy Court to honor gift cards. Technically, holders of gift cards are mere unsecured creditors. The Bankruptcy Code, however, provides that the claims of such folks have a priority (up to $2850) over most other unsecured creditors.
Of course, even priority claims are subordinate to the property-based claims of secured creditors but it's a rare secured creditor that would want the publicity that would come with flushing gift card holders down the drain. There is thus no need to go out and spend that gift card immediately, although I'm sure Sears and Toys 'R Us would be pleased if you did.
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