Rumors of an American Apparel bankruptcy are nothing new; however, on March 31, 2011 the company itself stated they may need to file for bankruptcy protection and could be forced to liquidate assets if they are unable to find proper financing to continue operations. The American Apparel Gift Card has been on ScripSmart's list of gift cards to avoid for quite some time; if you own this gift card use it today and avoid getting stuck with a worthless gift card.
Warning Submitted To The SEC
The warning was listed under Part 1A 'Risk Factors' of the company's annual 10-K filing to the Security and Exchange Commission. In short, American Apparel is loosing money and may not be able to obtain new financing. As a result, filing for Chapter 13 or Chapter 7 bankruptcy protection may be in the company's best interest. Unfortunately, bankruptcy is not usually in the best interest of those who own gift cards. In short, it looks unlikely there will be a dramatic turnaround, especially considering the extraordinary challenges the company faces. It's very likely retail locations will close and this warning should not be taken lightly if you own an American Apparel Gift Card. Assuming a company files for bankruptcy protection, here are two of the most common outcomes:
1. Chapter 13: More Time For Gift Cardholders
If the company finds the financing to continue it's operations, it may file for Chapter 13 bankruptcy protection, reduce debt and get back to profitability. This means gift cardholders will likely be given more time to redeem gift cards. However, as in the case of Blockbuster, a Chapter 13 filing can go sour and the company may be forced to sell it's assets. Best case scenario: the company is able to reach an arrangement with a creditors, turn the ship around and remain in business for years to come.
2. Chapter 7: The Death Axe For Gift Cards
If the company is unable to obtain proper financing, it may file Chapter 7 bankruptcy and begin the process of liquidating it's assets in order to pay of creditors. Often times, the brand name, domain name and customer lists are sold. In fact, Blockbuster's assets are up for sale and as a result, the company has issued a notice telling consumers the Blockbuster gift card will no longer be accepted after April 6, 2011. However, there is an unlikely possibility the new owner will decide to accept gift cards issued by the previous company. When assets are sold there is never enough to pay everyone off and gift cardholders are low on the priority list and often time frames for redeeming gift cards are rather short.
ScripSmart Bankruptcy Alerts
You can bet we'll be sending out Bankruptcy Alerts to those who have registered ownership of the American Apparel Gift Card in their ScripSmart account. The ScripSmart Alert service is free and it's just one of the things we're is doing to help consumers get the most out of their gift cards. If you're interested, sign up and register yor gift cards here.