How Sears' Bankruptcy Filing Affects Consumers
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Now that Sears has filed for Chapter 11 bankruptcy protection, how will this affect your Kenmore appliance warranty? And should you even buy an appliance at Sears?
Those are some of the key questions facing consumers following Monday's bankruptcy filing. Here's what we know so far.
The company says that 142 Sears and Kmart stores will close near the end of the year, with liquidation sales starting shortly. This is in addition to the 46 stores that are set to close by November. In laying out its strategy, Sears also says it expects to market and sell certain company assets over the coming months.
One of its more valuable assets is Kenmore appliances, Sears' house brand. Sears does not make Kenmore appliances—major manufacturers do—but Sears does provide the warranty, which normally lasts one year.
Twenty Kenmore appliances are on CR's current recommended list, meaning these ranges, dishwashers, refrigerators, washers, and dryers rate highly and do not have brand reliability issues. And there are others in the ratings that were impressive in our tests.
So what happens if you own a Kenmore appliance or are thinking of buying one? Here's a Q&A to help guide you.
Q. Will Sears honor warranties and extended warranties on appliances already sold, and appliances sold in the future?
A. Yes, at least for now.
"We are currently honoring our warranties, protection agreements, and guarantees as normal," says a Sears representative.
Appliance warranties are normally covered by the manufacturer. But in the case of Kenmore appliances, Sears is responsible for the warranties.
Companies that reorganize under bankruptcy protection and emerge as an ongoing business or get taken over by another company tend to honor warranties, according to Henry Sommer, a lawyer and president of the National Consumer Bankruptcy Rights Center.
“They want to preserve their customer good will,” Sommer says.
Q. What if Sears liquidates and sells off all its assets?
A. Again, the warranties are probably still good.
“If they liquidate by selling to another company that takes over the business, consumers likely would see all their warranties (and gift cards) honored by the new owner,” Sommer says.
Q. What if I see a great deal on Kenmore appliances?
A. There is a risk, but probably not enough to pass up a bargain.
"Be aware that there is a chance that the Kenmore warranty, or any warranty from Sears itself, won't be honored if Sears liquidates without another owner taking over,” Sommer says.
That said, he adds: “Most people never have to make a warranty claim. And don't buy a service contract, which is just a very expensive form of insurance.”
Q. Will I receive the appliance I've ordered?
A. The chances appear good, at least for now.
"We will make every effort to ensure a timely delivery for your order," says Sears, for items that are currently being shipped.
As long as it is keeping stores open, it should not be different from before, Sommer says.
"I'd just be a bit wary of something that is back-ordered and not assured of delivery by the end of the year," he adds. Check with your store for an update on your delivery and check Sears’ site for announcements.
Use a credit card to pay for your appliance. You should be able to get the charge reversed with your credit card company if the appliance doesn't arrive, Sommer says.
Q. What should I do if I have a Sears gift card?
A. Spend it.
"Anyone with a Sears gift card should use it now," says Christina Tetreault, senior staff attorney at Consumers Union, the advocacy division of Consumer Reports.
That’s because if Sears closes its doors before you get a chance to redeem your gift card, you’ll have to file a claim with a bankruptcy court.
“The court will ultimately decide whether Sears will honor its gift cards, and if so, for how long,” she says. “It could take years for cardholders to recover funds—if they get anything at all.”
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