Updated: September 24, 2012 6:25AM
Don’t toss out those Borders gift cards just yet. The national book retailer filed for Chapter 11 bankruptcy protection last week, but that doesn’t mean all of its stores are hanging “Out of Business” signs on their doors just yet.
A Chapter 11 bankruptcy gives a debt-ridden company the chance to reorganize its finances without shutting down. It’s too early to say whether Borders will emerge successfully, but the company says it plans to operate normally in the meantime.
A look at what Borders’ bankruptcy filing mean for consumers:
The chain plans to close about 200 of its 642 stores across the country over the next few weeks.
Some clearance sales were expected to start as early as this past weekend.
A list of the stores slated for closure is available at http://apne.ws/hZbj1M . All the targeted locations are superstores, not the smaller Waldenbooks and Borders Express stores the company also operates.
Borders says it will continue honoring its gift cards, but it’s still a good idea to cash them in as soon as possible.
Companies that reorganize under Chapter 11 bankruptcy can suspend the acceptance of gift cards, which are treated as loans to the company.
Gift card holders are considered unsecured creditors, meaning they’re among the last to get their money back. Secured creditors — those with debts backed by assets such as real estate or accounts receivable — are at the top of the list.
So if the company fails to emerge from Chapter 11 bankruptcy and goes out of business, there’s a good chance gift card holders will lose some, if not all, the value remaining on their cards.
If the company is purchased, the new buyer could opt to honor gift cards.