How Going-Out-of-Business Sales Work in a Bankruptcy
Who runs a bankrupt chain's liquidation sale, why discounts can be smaller than they look, and where to find the deadlines for gift cards, returns and rewards.
When a bankrupt retailer closes stores, the going-out-of-business sale is usually run by a professional liquidator under a bankruptcy court order that sets the sale rules. Merchandise is typically sold “as is” and final, and gift cards and rewards are accepted only until a stated date. Those terms are in the store-closing order and the customer notice posted on the claims agent’s case website.
Who runs a going-out-of-business sale in bankruptcy?
Most chains hire a liquidation firm under an agency or consulting agreement. The liquidator sets prices, schedules discounts, staffs the sale with store employees and sometimes brings in extra merchandise, and it is paid a fee or a share of proceeds. The company asks the court to approve that agreement along with “sale guidelines” covering signs, hours, advertising and how the sale ends.
Eddie Bauer LLC and its affiliates, which operated the Eddie Bauer stores, show how this works. They began store closing sales at all of their brick-and-mortar locations between January 26 and February 7, 2026, filed for Chapter 11 in New Jersey on February 9, 2026, and on February 10 received an interim court order approving the agency agreement, the sale guidelines and changes to customer programs at the closing stores. The order allowed sales “free and clear” of liens and claims, which means buyers get clean title and lenders are paid from the proceeds instead.
In a Chapter 7 case the company itself no longer runs the business; a trustee decides how inventory is sold, sometimes through an auction instead of a store sale. The differences are laid out in Chapter 11 vs Chapter 7.
Are going-out-of-business sales final sale?
Almost always. The notice sent to Eddie Bauer customers said merchandise sold at the closing stores would be sold on a final basis and that returns would not be accepted at any of its stores. Most store-closing orders follow the same pattern, although some allow a short return window for defective goods. The policy is usually posted at the register and on store signs.
| Item | Usual rule at a bankruptcy closing sale | Where the deadline is written |
|---|---|---|
| Purchases during the sale | Final sale, as is | Store signs and the customer notice |
| Returns of items bought before the sale | Accepted for a short period, or not at all | Store-closing order or customer notice |
| Gift cards | Accepted until a set date, then not honored | Customer notice; in Eddie Bauer’s case March 12, 2026 |
| Loyalty points and coupons | Often ended at the start of the sale or with gift cards | Customer notice |
| Price adjustments and layaway | Usually ended | Sale guidelines |
What happens to gift cards during a liquidation sale?
Gift cards are typically honored only for a limited time after the closing sale starts. The Eddie Bauer notice said gift cards and rewards points would be accepted at the closing stores through March 12, 2026, that gift cards would not be accepted after that date, and that they “shall not be redeemable for cash at any time,” despite any policy or state law to the contrary. After the cutoff, the remaining balance is at best a general unsecured claim in the case. Details are in are gift cards still good when a retailer files for bankruptcy.
Are liquidation sale discounts real?
The percentage is real, but the starting price may not be the one you remember. Liquidators decide which price the discount applies to, and consumer protection officials have long warned that it can be a list price or a reset ticket price above what the store charged before. A modest early discount on an inflated ticket can leave some items close to their old sale price. Discounts usually deepen as the closing date nears, while the selection shrinks.
A few ways to check:
- Photograph or note prices of items you want before the sale starts, or compare with the company’s website while it is still selling online.
- Compare with other retailers that carry the same item.
- Read the receipt for “final sale” or “as is” wording before you leave the store.
- Pay by credit card when you can. If a purchase is not delivered as agreed, the Fair Credit Billing Act lets you dispute the charge; the FTC’s guide to disputing charges explains the 60-day deadline.
Do state going-out-of-business laws apply?
Many states and cities regulate going-out-of-business sales outside bankruptcy, with licenses, time limits or rules against bringing in new merchandise. Washington, for example, requires notice of the sale to be filed with the county auditor at least 14 days before it begins and limits such sales to 60 days under RCW 19.178, according to the Washington attorney general.
In a bankruptcy, the store-closing order and sale guidelines usually address how those state and local rules apply, and companies often ask the court to let the sale proceed without separate local permits. State attorneys general and local governments can object to the motion before the order is entered, and their agreed changes are often written into the final order. If you have a complaint about how a sale is run, the attorney general’s consumer protection office is the place to report it.
Where do you find the store-closing order and notice?
Large Chapter 11 cases use a claims and noticing agent, such as Stretto, Kroll or Epiq, that posts every filing on a free website. In the Eddie Bauer case it was cases.stretto.com/EddieBauer. Search the docket for “store closing,” “agency agreement” or “notice of changes to customer policies.” The same site shows whether the company plans to keep some stores open under a buyer, which can change what happens to gift cards and returns there. Orders placed before the filing are covered in what happens to your order or deposit when a company goes bankrupt.
Bottom line
A closing sale can start before the bankruptcy filing, as Eddie Bauer’s did, so the court order and its customer deadlines may arrive weeks after the signs go up. Use gift cards and rewards at the first discount stage instead of waiting for deeper markdowns, because the cutoff date in the customer notice applies no matter how much balance is left.
FAQ
Can I return something I bought at a going-out-of-business sale?
Usually not. Bankruptcy closing sales are typically final, and the store may close before any return window would end. A manufacturer’s warranty still applies to defective products.
Do going-out-of-business sales add new merchandise?
Some do. Agency agreements may allow the liquidator to add goods not from the store’s original inventory, subject to the sale guidelines. Those details are in the motion and order on the claims agent’s site.
Why do discounts get bigger near the end?
The liquidator raises discounts on a schedule to clear the stores by the closing date set in its agreement, because leftover inventory and store leases cost money.
