Business bankruptcy can leave customers hurting

Ask the AG

Consumer: My fiancé and I paid $2,500 to reserve a venue for our upcoming wedding. Weeks before we’re scheduled to exchange vows, the business has filed bankruptcy. Will we get our money back?

Attorney General Rob McKenna: The weak economy means that an increasing number of retailers and service providers are shutting their doors. If you paid your deposit with your credit card, you may be able to request a refund known as a “chargeback” from the card issuer. But if you paid by cash or check, your option is to file a claim with the bankruptcy court and wait to see what happens.

If a company files for bankruptcy, it’s up to the court to decide which financial obligations are honored. You may receive all, some or none of your money back. You should consider whether the inconvenience and expense of pursuing the claim are worth the potential benefit.

When companies go broke, the Washington Attorney General’s Office frequently hears from consumers who are left with empty wallets or other woes. Buyers may lose deposits on ordered merchandise or services. Gift cards may become worthless. Warranties and repair plans may become void. While bargains can be found at liquidation sales, consumers who aren’t satisfied with their purchases usually have little recourse.

Many problems can be avoided if consumers follow these tips:

• Pay the smallest deposit possible for merchandise or services you will receive later.

• Pay with a credit card because laws provide you with safeguards if the business fails to deliver your merchandise or provide a service.

• Use gift cards as quickly as possible and avoid buying cards from financially-strapped retailers.

• When shopping liquidation and going-out-of-business sales: remember that there are usually no refunds; inspect the merchandise before you buy; verify warranty coverage, as most stores won’t be able to honor their own warranties and service policies after they’ve closed (a manufacturer’s warranty or extended service contract backed by a third party may cover repairs); and compare prices elsewhere.

We’ve created a Web page at to help consumers prevent common problems and deal with them when they occur. The site also includes information for retailers, which must follow certain procedures when advertising and conducting going-out-of-business sales.

Want more consumer advice? Check out the attorney general’s all consuming blog at

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Attorney General Rob McKenna offers this public service to help consumers avoid fraud and to promote a fair and informed marketplace. If you have a consumer complaint or inquiry, contact the Consumer Protection Division atwww.atg.wa.govor 1-800-551-4636 between 8 a.m. and 3 p.m. weekdays. To suggest a future topic for this column, write to “Ask the AG,” Attorney General’s Office, 800 5th Ave., Suite 2000, Seattle, 98104-3188.

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