5 On Your Side

Customers left holding the bag after RoomStore files for bankruptcy

Posted July 12, 2012

RoomStore is now officially out of business, and under the control of a liquidator.

A shock to customers - some who ordered and paid for furniture just days before the doors shut.

"Today I was coming to get my stuff and everything," customer Kennedy Kibe said. "Pay the last balance and get my stuff, but I did not."

Kibe ordered new living room furniture in May. He planned to make his final payment and take his furniture home

"I paid them – this is $300, that's $300 – then I came back and paid $400. So that's $1,000," he said. "I work very hard for that money."

Antoine Pope e-mailed, angry about the $1,600 he paid RoomStore for a new bedroom set that was supposed to be delivered late last month.

Karen Timkey was "flabbergasted that they allowed her to place an order for $1,250" in June. She said they "likely never had any intention of delivering the product."

Anna Bray ordered $2,500 worth of furniture she didn't get. They "took my hard earned money," she wrote. "I saved up for this for over a year."

Pope, Timkey and Bray are only three of dozens and dozens of RoomStore customers who will likely never see the furniture or their money.

And making it all worse, customers can only watch as furniture they bought is resold by a completely separate company as part of the bankruptcy liquidation.

It's perfectly legal, said attorney James Vann.

Vann handles a lot of bankruptcy cases. He says under the law when a company files bankruptcy, all assets are liquidated and that money then goes to the bankruptcy court-- ideally to be divied up between all of the people the company owes,

"The theory is if one person gets a benefit, then all the creditors should get a benefit," he said. "So it's very difficult to say, 'Oh by the way, you're the one who gets the greatest benefit.'"

That means, for example, the court can't just pick the one customer who gets the floor model couch.

And even though owed customers should submit a claim form to the bankruptcy court, Vann says it's not likely they'll get their money back because of the totem pole of payout priorities.

"You have administrative claims, you have secure claims, then you have everybody else," he said. "As a consumer in that claim, more than likely, you are going to be an unsecured creditor, which is very low on the totem pole.

So how can you help protect yourself from a bankruptcy bust?

Paying with a credit card offers some protection. But perhaps the best way: Go online and research a company prior to a big purchase. In this case, customers probably would have seen that RoomStore had filed for bankruptcy.

Something Kibe wishes he had done

"It's like stealing," he said. "It's like stealing money from me."


This story is closed for comments.

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  • boolittlek Jul 20, 2012

    Well, I guess if having a score of over 800 means my credit is “in the toilet”, then so be it. I had the money to purchase the furniture outright a year ago, and I still have it now. I have availed myself of a number a no-interest finance deals over the years, and they have allowed me to build an immaculate credit record.

    But thank you so much for your baseless opinion of my finances--specious reasoning always gives me a good laugh!

  • OneLove Jul 20, 2012

    I saw a ROOM STORE "customer service truck" just this morning!

  • stole Jul 18, 2012

    boolittlek, you obviously didn't have the money to purchase it. Nice try though. Keep taking out new lines of credit to buy things you can't afford and keep watching that credit score go in the toilet.

  • Greyhound_Girl Jul 17, 2012

    boolittlek - that's how we buy "big ticket" items...get one of the "financing" deals...that way we walk out the door with the furniture or whatever we purchased. I see it as "free money"...pay a little bit over 2 years at zero percent interest.

  • SirWired Jul 16, 2012

    Kenshi, FWIW, employees have priority over other unsecured creditors (such as customers or vendors.)

    Esprg, the company isn't being protected at all; it's gone.

  • kenshi Jul 16, 2012

    The employees will probably not get paid their last checks either. The law is supposed to be just, but it rarely is.

  • boolittlek Jul 16, 2012

    Yikes... glad I got my bedroom set from them back in August.

    I financed my furniture through one of those 4 years/no-interest deals (not layaway, not rent-to-own). It was a credit card purchase (the card/account is held by a third party, not by RoomStore). And by the way, I had the money to pay in full upfront. But from a cash flow standpoint, it just made more sense to finance at no-interest.

  • Randy Cox Jul 16, 2012

    Beach, creditors before customers. That's the law. Yeah, it sucks. That's why layaway can be dicey.

    They should have just saved up their money and paid in full. But, some people lack the restraint needed to save up for stuff. And, that's where sleazy rent-to-own stores, pay-day lenders and lay-away businesses fill the void.

  • esprg Jul 16, 2012

    If people have paid for furniture just let them get the furniture. Why go through having them wait and for a percentage ofwhat they paid and it be nothing remotely close to what they deserve.

  • beach2011 Jul 16, 2012

    That is just wrong!!! You are protecting the company but what about the consumer. Screwed as usual!!!!!!!