The economic impact of the COVID-19 pandemic has caused many companies — such as J.C. Penney, J. Crew, Dean & Deluca, Gold’s Gym, Hertz, and California-based businesses such as those that operate the family entertainment center “Boomers!” and the popular children’s camp “Camp Galileo” — to file for bankruptcy.
“Consumers have rights when a business fails,” said Attorney General Becerra. “Bankruptcy does not grant debtor companies blanket freedom from their commitments and obligations to their customers and creditors.”
Here is what consumers need to know:
Are my gift certificates issued by the business now worthless?
They shouldn’t be. California law specifically protects gift certificates. Money paid for a gift certificate belongs to you, not the business. A business must continue to honor your gift certificates, even if it files bankruptcy.
What happens to my money if I paid ahead or put down a deposit for something the business hasn’t yet delivered to me?
To protect consumers, the Bankruptcy Code provides consumers with a “priority” claim of up to $3,025 for a deposit put down on undelivered consumer products or services.
Although this doesn’t necessarily mean that you will get all your money back from a bankrupt business that closes for good, it does mean that you are generally entitled to be repaid up to $3,025 if a business continues to stay open after bankruptcy.
Proof of Claim
If a business, that owes money to consumers, files for bankruptcy, consumers should consider submitting a “Proof of Claim” in the bankruptcy.
This is a simple, three-page form that asks you to provide information about why you are owed money. A template proof of claim is available at www.uscourts.gov/forms/bankruptcy-forms/proof-claim-0.
If a business is holding consumer deposits at the time it files bankruptcy, consumers who are owed money on account of those deposits should consider checking box 12 (regarding priority claims) and the box next to the phrase “Up to $3,025* of deposits toward purchase, lease, or rental of property or services for personal, family, or household use.
Consumers who are owed money may automatically receive bankruptcy notices about deadlines and hearings, but this does not always happen.
Bankrupt businesses usually set up websites to provide information to the public about the bankruptcy.
These websites often include important information about upcoming dates, allow consumers to file a proof of claim, and provide phone numbers and email addresses to seek additional information. An internet search can help locate these websites. Here are the websites for the bankruptcies for Hertz, Gold’s Gym and JC Penney:
- restructuring.primeclerk.com/hertz/
- www.bmcgroup.com/restructuring/sitedisclaimer.aspx
- cases.primeclerk.com/JCPenney/
Information and forms for creditors are provided by the Bankruptcy Court for the Northern District in San Francisco at www.canb.uscourts.gov/content/information-creditors.
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If you believe that a bankrupt business is not honoring your bankruptcy rights, you may file a complaint with the Attorney General’s office at oag.ca.gov/report.