feRadioShack Agrees To Pay Outstanding Gift Card Balances Before Paying Other Debts

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(Matthew Hunt)

The state attorney general of Texas, home state of the company formerly known as RadioShack, wasn’t pleased that the electronics retailer went out of business with an estimated $46 million in gift cards outstanding. Normal bankruptcy procedure is that gift card holders who don’t cash in their cards before the deadline–usually 30 days after the company files for bankruptcy status — are out of luck. Thanks to the TX AG, the American public won’t have to shrug off the loss of that money… unless they lost their gift card.

In RadioShack’s case, this becomes a bit more confusing for people who haven’t been paying attention. (Not you. You read Consumerist. Other people.) One of the company’s creditors purchased less than half of the still-operating stores and continues to operate them as RadioShack stores, co-branded with mobile carrier Sprint. Not much has changed, from the average consumer’s point of view, except that the new RadioShack won’t accept your old gift card.

AG Ken Paxton accused the Shack of knowingly selling gift cards when it was about to file for bankruptcy protection. What normally happens with gift card holders in a retail bankruptcy is that they have to get in line behind the company’s secured creditors if they know to file a claim at all, and receive a tiny fraction of their card’s value or nothing at all.

Today’s settlement means that RadioShack will have to pay out the entire $46 million or so before paying its other creditors. The bankruptcy court will appoint a claims agent company to pay, and customers will have 12 months after the former Radioshack finally liquidates to file their claims with that company.

by Laura Northrup via Consumerist