Guard Against Bankrupt Businesses

Consumer Reports offers these tips to avoid losing money when a business goes bankrupt.

Keep in mind, the number of businesses filing for bankruptcy was on the rise even before Wall Street went into a tailspin.

Several national retailers have filed for bankruptcy protection, including Lillian Vernon and Sharper Image.

Kim Kleeman, 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 Kleeman.

You generally have less recourse if you paid with cash, a check, or a debit 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," said Kleeman. "If a retailer goes bankrupt, you may still 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."

Consumer Reports says if you're owed money by a company that's gone under, you can file as a priority creditor with the bankruptcy court.

You may not recover much during bankruptcy proceedings, but it can be worth a try.

Check on line for the name of the court where the company filed, or ask your local consumer protection agency for advice.

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