Bankruptcy Information for Consumers

When a retail store files for bankruptcy, the consumer becomes a creditor.

Bankruptcy is a federal legal process through which individuals or businesses who are in debt may seek to eliminate the debt, repay some or all of it, or liquidate their assets to obtain relief from their financial troubles and start over.

It is important that consumer creditors be aware of deadlines related to a Bankruptcy filing.  You may call the Bankruptcy Court where the business filed to obtain more information and specifics about a claim as a consumer creditor.  There are three offices of the United States Bankruptcy Court for the District of Massachusetts that are located in Boston, Worcester and Springfield.  The contact numbers for each are as follows:

Boston (617) 748-5300

Worcester (508) 770-8900

Springfield (413) 785-6900

Types of bankruptcy

A retailer or business that is experiencing financial difficulty may file for Bankruptcy. Generally, the most frequently filed bankruptcies are Chapters 7, 11, and 13 which refer to the Chapter of the Federal Bankruptcy Code under which the filing is brought by the debtor.

A Chapter 7 bankruptcy involves the liquidation of assets and discharge or elimination of the debt. A Chapter 11 filing is where a company or individual proposes a plan to stay in business and keeps operating by reorganizing itself. Part of the plan by the business or individual debtor also includes making payments to creditors over a period of time. A Chapter 13 filing for bankruptcy protection is available for individual debtors who earn a regular income and want to enter into a repayment plan to take care of their creditors over a number of years.

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Gift Cards, Gift Certificates, Prepaid Services, and Merchandise

What happens with the company where you have a gift card to use goes out of business? Your options often depend on what is happening with the business. If a store switches ownership or is bought out by another business, ask if the gift card or prepaid services will be honored. The businesses mayl honor gift cards or prepaid services for a set amount of time. If the business closes completely, it’s possible that a former competitor will honor the card in hopes you will return or provide the service at a discounted rate. 

If you paid for a gift card, service or item with a credit card, contact your credit card company. You may be able to convince them to reverse the charge.

When a company goes bankrupt, you may need to claim yourself as a creditor because the company owes you money or merchandise.   

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Proof of Claim

A consumer creditor who is owed money by a business that has filed for bankruptcy must file a Proof of Claim in a timely manner and in accordance with the procedures of the particular bankruptcy court in which the business filed. A Proof of Claim is a written statement by a creditor on a form provided by the Federal Bankruptcy Court that outlines the reason the debtor owes the creditor money. It is important for consumers to be aware that there are strict deadlines for the filing of a Proof of Claim. The Proof of Claim Form can be found on the Bankruptcy Court website.

Important Notes:   The Office of Consumer Affairs and Business Regulation is providing this information to consumers for the purpose of alerting them to certain rights they may have as creditors when a business files for bankruptcy protection.  We recommend that consumers contact the Bankruptcy Court directly for more detailed information or consult with a bankruptcy attorney if seeking legal advice about a bankruptcy filing.

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