So Sharper image is not honoring it's gift cards because it's not a high priority debt for the debtors that Shaper Image owes revenue to. However, as a consumer, when they purchase a gift card, where does it say they get a second priority? Why is a lender get first priority and a card holder second?

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I'm not a lawyer nor do I play one on TV, but for a company to sell those gift cards (knowing they were in financial trouble) and then refuse to honor the card or to refund the money sounds like fraud. Try filing a complaint with your local district attorney and in general raise some hell.

Because the lender will always take first lien position on all business assets. Gift cards are unsecured obligations.

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Spock Jenkins of the Vulcan Jenkins'.

Bankruptcy puts all the lien holders in a row. Unfortunately for gift card holders, they are somewhere in the back. In most situations, the people at the end of line are left holding worthless paper (or in this case, plastic). It is possible that cardholders will be reimbursed if all of the other debts in front of them are fulfilled. In the meantime, Brookstone said they would honor SI cards, sort of. IIRC, they were offering to accept them as 25% off coupons, regardless of the value of the card and the value of the purchase (there may have been limits). I don't know if that offer is ongoing.

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I wonder if you can deduct your lost money for your gift card from your taxes, sort of as an unrecovered loan?

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Also, it seems that SI is now allowing one to redeem cards purchased before March 8, 2008 (the date they filed Chapter 11). There are some additional rules that don't seem particularly onerous. Also they are attempting to have gift card holders moved into the priority unsecured claims category, which means they get paid before general unsecured claims but is still no guarantee of payment.

Since they filed 11 instead of 7, it is now up to the bankruptcy court to determine how much of their assets to pay off to and how much of their debt to relive. Had they filed chapter 7, it is likely that everyone would get paid since, according to wiki, their assets exceed their debt. It is possible for a chapter 11 to turn into a total liquidation, but I think SI wants to stay in business. We'll see how that goes.

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hu ða æþelingas ellen fremedon.

But if they took your money after they declared bankruptcy, they're off the hook? That doesn't seem right, does it?

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SeanF

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well, I assume the declaration of bankruptcy is public. It's like--if the airport is there already or zoned for already and you buy a house at the end of the runway, it's your problem--you took the risk. But if your house is there and the airport is built later, at least in Maryland the airport is required to put up sound barriers.

Personally, I don't like gift cards--which is why I only give them as gifts

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I don't think they are off the hook, they just don't get the same "benefits" as those purchased before. I would be curious about how many people bught them after that date and why.

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Hwæt! We Gardena in geardagum,
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This is what gets me. Why is the lender so important? Say that, they owe $5 Million to the lender and $7 million to the gift card holders, why should the banker be more important than the general public?

In the back of my mind, I'm thinking, that a mob with baseball bats will suddenly find their gift cards secured obligations.


I don't have an SI giftcards. I just saw this on the news a while back and was wondering.


And Brookstone is only trying to drum up business by offering that.

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Fields of Space

LOGIC, n.
The art of thinking and reasoning in strict accordance with the limitations and incapacities of the human misunderstanding.

In the Year 2525.

"One small step for (a) man. One giant leap for mankind".

If an astronaut doesn't need good grammar, niether does you.

Host of Seraphim

Because bankers have a LOT more influence with those that make the laws than the general public. When was the last time you took your congressman out for a three hour lunch and dropped a few thou in his campaign warchest?

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I object to giving companies free loans, so I avoid gift cards, unless there is a price discount or some other significant monetary advantage.

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Why not just give cash? Works in most places I know. Cash is no less crass than a gift card.

They aren't more important, they just have a deal with the business (secured loan, as mentioned). These security arrangements are necessary to induce to lender to lend in the first place.

Not much different than your mortgage, in principle. Doesn't matter who else you owe money to, the mortgage holder has first lien on your house.

Don't be too bitter about the card. If it wasn't this way, you wouldn't have the shopping choices you do. Can you imagine if a business had to save up all the cash necessary to start and operate a business? That is, loans weren't available? SI wouldn't have existed in the first place.

As stated. Secured vs. unsecured. The lender took a lien against the assets of the business. That means in a liquidition, once inventory is sold - the proceeds are required to be used to repay the secured lender before any unsecured lender.

Consider the situation when you have work done on your house and don't pay the contractor. They can file a lien against your house and should you try to sell the house - you will be required to repay the contractor with the proceeds of the sale after you've satisfied any existing mortgages before you can pocket any equity. And if Uncle Bob let you borrow $100 last year - he can forget it. He has no claim on your house.

When you purchase a gift card - you are essentially making an unsecured loan to a company with the expectation that they will repay you an equivalent value in merchandise at some point in the future. If they have no merchandise, or if somebody has a prior claim on that merchandise (i.e. - the secured lender) - the card holder is out of luck unless some agreement can be reached between the company and the secured lender to honor them.

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Spock Jenkins of the Vulcan Jenkins'.

Exactly. One reason why I never buy gift cards!

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I'd rather be given a gift card, personally; if it's for a store I like, it shows that the giver knows two things about me. One, that I like a certain store. (Graham's mom tends to give me fabric store gift cards, and that's somewhere you really can't shop for another person.) Two, that I have fun picking out the item I'm going to buy with it.

Actually, and three, that I'd use money for serious things like household expenses.

Our four weapons . . . .

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My father transfers me some money at Christmas and for my birthday. I still haven't spent the last two gifts because I haven't seen anything that interests me sufficiently to say "That was his gift!" The money is earmarked though, and eventually it'll get spent on something that I can show him and say, "Hey, thanks for this". I guess I'm just not an enthusiastic shopper. Maybe a gift card for a specific store would be more effective, because it would ensure that I used it in that place on whatever in their inventory most closely met my desires. That might also be driven by a fear of losing the card.