What happens to Sears warranties, gift cards if they liquidate?

An ABC7 I-Team Consumer Investigation
CHICAGO (WLS) -- The iconic Sears is on life support. Both Sears and its Kmart stores are struggling to stay open, facing potential liquidation. Sears is currently considering a revised bid from its chairman to save 425 Sears and Kmart stores and tens of thousands of workers.

But the since the fate of the giant retailer is in up in the air, the I-Team has some pointers if you are shopping there soon, or have warranties and gift cards.

"They were always really good about, you know, if you had any problems, you could take your machine back and they would give you new parts or replace it," said Sheila Kettering, longtime Sears customer.

People trusted Sears for over 100 years. But since the retailer filed for bankruptcy protection late last year, that trust has been shaken.

"If you have any gift cards, spend them as quickly as you possibly can and don't purchase any more," advised James E. Dion of Dionco Inc., a Chicago based retail consultant.

Dion said gift cards can be protected in bankruptcy but it's never a guarantee. He recommended acting fast on any items you are considering returning to Sears or Kmart, while you still can.

"Understand that all sales are final at this point. Even though they don't tell you that. They will still have the famous Sears guarantee, that guarantee will go away when full bankruptcy occurs. You really need to protect yourself when buying anything from Sears. And that's sad to even say," he said.

On January 14, there will be a decision on whether a downsized Sears will continue or have its assets auctioned or if a new bid will be accepted to keep the retailer a float.

"Sears did sell a huge amount of extended warranties." Said Dion. "Those warranties are held, in many cases, by third parties and they will still honor those."

The Better Business Bureau told the I-Team the courts decide the fate of warranties for businesses in Chapter 11 bankruptcy protection. Consumers would be at the end of the line because creditors are first to be paid.

But Dion added that manufacturers like Samsung or Whirlpool will likely honor their warranties on products purchased at Sears. Just make sure you have proof of when the item was purchased. Sears' brand Kenmore warranties also may still have life. Dion said Sears' large parts-and-repair business has always been profitable and will likely be bought.

"Whoever buys that likely, just as a smart business decision, will honor those warranties," he said.

The I-Team reached out to Sears and asked about warranties and returns but they declined to comment.

If Sears and Kmart liquidate, there will be significant discounts of their inventory, but all sales would probably be final.

Land's End, many of which are inside Sears stores, will not be affected. They are not owned by Sears, are focusing on more independent stores and have had growth in sales in recent years.
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