Recouping money from bankrupt businesses

LOS ANGELES Maryann Malzone's daughter loves to dance, so when she wrote a check for Julia to take classes at a local dance studio, Maryann considered it money well spent. That is, until the studio went bankrupt after only two classes, leaving Maryann out the $980 she had already paid for tuition.

"Just out of nowhere, they closed the doors. Out of business. So, did they know it was coming? Probably. Were they still accepting money from people for a service they couldn't provide? Yeah," said Maryann Malzone.

The studio where Maryann's daughter danced now sits empty. So does a storefront, one closed by retail giant Linens 'n Things. Several national retailers have filed for bankruptcy protection, including Lillian Vernon and Sharper Image.

Kim Kleman, the editor of Consumer Reports magazine, says there are several ways you can protect yourself in these shaky financial times. First, pay with a credit card - especially when leaving a deposit.

"If the business goes under before you get what you paid for, you can dispute the charge with the card issuer," said Kim Kleman, Consumer Reports.

You generally have less recourse if you paid with cash, a check, or youf debit card, so make sure you use a credit card. Another precaution to take -- spend gift cards as soon as you can, even if there's no reason to suspect the retailer is having financial difficulties.

"If someone you're doing business with goes belly-up, all isn't lost. If a retailer goes bankrupt, you still may be covered by the manufacturer, and if the manufacturer goes under, you still may have rights at the store where you bought the product or service," said Kleman.

After losing nearly a thousand dollars, Maryann Malzone has changed the way she pays.

"I try and put as much as I possibly can on my credit card," said Malzone.


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