Texas attorney general seeks delay in RadioShack bankruptcy over gift cards

Texas wants a bankruptcy judge to delay a hearing on RadioShack’s reorganization plan until the company provides written notice to gift card purchasers.

In June, Attorney General Ken Paxton asked the Delaware judge to give cardholders priority status to collect in court and asked that the state be granted permission to file a claim on behalf of its residents for any amount not redeemed.

In a new filing Tuesday, Paxton said the company has yet to provide any notice to cardholders about the claims process, even though it is seeking to have its bankruptcy plan confirmed next month.

“Due to RadioShack’s actions, millions of customers are at risk of being shut out of the bankruptcy process, and they have every right to have their voices heard,” Paxton said in a statement. “Just as my office successfully fought to secure the privacy of RadioShack customers, we will remain vigorously committed to ensuring consumers who hold unredeemed gift cards aren’t short-changed.”

Paxton contends that the gift cards do not list an expiration date and that the company told customers after it filed for bankruptcy that they do not expire. But in court proceedings, an expiration date of March 31 was established for redemption.

Paxton says that 2.9 million customers hold unredeemed gift cards worth about $46 million. Under RadioShack’s amended plan, cardholders whose claims are less than $10 will receive nothing, according to court papers.

RadioShack filed for bankruptcy in February. The Standard General hedge fund bought more than 1,700 stores out of bankruptcy and continues to operate them in conjunction with Sprint. The rest were closed.

The remainder of the RadioShack estate is still in bankruptcy.

This report includes material from Bloomberg News.

This story was originally published August 11, 2015 at 3:53 PM with the headline "Texas attorney general seeks delay in RadioShack bankruptcy over gift cards."