Sears Holdings Corp., the parent company of the retail chain Sears, filed for bankruptcy in mid-October. The company, once a staple in malls, has struggled for years and closed about 1,000 stores in the past decade.
“It’s been a long time coming,” said Pamela Foohey, professor of law at Indiana University. “I’ve been teaching bankruptcy for seven years and I’ve been predicting for the past five years they were going to go under.”
While the move may not be all that surprising, it leaves shoppers with questions: Will they receive the products they ordered? Will they lose their warranties?
While the the company hasn’t released much information on the bankruptcy or any possible restructuring, your orders and warranties are safe for now.
“We are honoring our warranties, protection agreements and guarantees as normal,” Howard Riefs, a spokesman for Sears Holdings, said. As for any orders: “We will make every effort to ensure a timely delivery.”
Foohey said most stores will stay open to shoppers for a couple of months to complete any pending shipments and sell off any remaining products. If Sears cancels an order, she said the buyer could file a monetary claim to get their money back. Sears is accepting claims online.
But don’t expect to see the money immediately. Ira Rheingold, executive director for the National Association of Consumer Advocates, said it could take years to review claims. A third-party administrator will process any claims consumers file against Sears. Claims must be filed before the bankruptcy court deadline. The court hasn't set a deadline yet.
“If you file a claim, you are falling under a long list of creditors,” he said. “It’s going to take them a long time to sift through everything.”
Foohey said the process is taxing, but with many buyers filing claims, and based on Sears’ bankruptcy plan, a claimant could expect to receive 100% of their money back. But, she said, “It’s going to take a lot of calling customer service."
The same goes for warranties. Foohey said if a shopper has a product with a warranty that runs past the bankruptcy date they should also file a claim to ensure it's honored.
But if Sears ceases to exist in a couple of years and your fridge breaks, how will you cash in on your warranty?
Foohey said the bankruptcy plan will essentially set up a trust in the Sears name, funded with money from the bankruptcy reorganization. The trust will run for years after the bankruptcy, to cover the warranties of any Sears products.
For most shoppers, the Sears bankruptcy won’t have much of an effect on their wallet, or even their shopping experience. Foohey said most shoppers will continue their regular shopping habits elsewhere. This includes Sears’ direct competitors, from retail giants like Target and Walmart, to online marketplaces like Amazon.
“The places where Sears is having trouble is where people are shopping now,” she said. “But the interesting thing with this specific bankruptcy is the physical stores it leaves in its wake. It really speaks to the trend away from retail malls.”
The retail giant plans to slowly close at least 142 stores through the holiday shopping season, keeping open its most competitive locations. You can still do your holiday shopping at any open Sears locations, but don’t expect to see any significant price drops, according to the Sears statement.
“It really doesn’t mean a lot for the average consumer,” said Rheingold. “It probably just means you won’t be able to shop at Sears anymore. It's a place folks grew up with, but you move on.”
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