Avoid buying gift cards from retailers that are in trouble. The following is an updated list of major retailers that have recently filed for bankruptcy or have closed all stores. There may still be people out there trying to sell gift cards from these retailers. In some cases, the retailer’s own website does not tell you about their current troubles and may continue to sell gift cards. A few of them plan to stay in business but avoid their gift cards until their financial situation improves. Here is the list:

KB Toys – Closing all stores
Circuit City – Filed for Chapter 11 bankruptcy in November, 2008 (Plans to reorganize and stay in business).
Linens ‘N Things – Closing all stores
Steve and Barry’s – Closing all stores
Tweeter – Closed all stores
Value City Department Store – Closing all stores
Boscov’s – Filed for Chapter 11 bankruptcy in August 2008 and closed some stores. (Remaining stores sold to a group led by a Boscov family member and they plan to stay in business)
Levitz Furniture – Closed all stores
Sharper Image – Closed all stores
Bombay Company – Closed all stores
CompUSA – Closed most stores. Now has 23 stores operating in Florida, Texas, North Carolina and Illinois. CompUSA and TigerDirect are now sister companies. Still issuing gift cards. Clarify their gift card policy before buying. Not sure if they are still redeeming old gift cards or only gift cards issued after the bankruptcy by the “New” CompUSA.
Mervyns – Closing all stores
Bennigan’s, Ponderosa, Steak and Ale restaurants – Company-owned restaurants all closed. Some independently owned restaurants still operating. Gift Cards still sold in some grocery stores. Check with a Bennigan’s, Ponderosa, or Steak and Ale restaurant near you to make sure they are still redeeming gift cards (those issued before the bankruptcy and after).

Note: There is an email circulating (click here to see email) that is warning consumers not to buy gift cards from certain retailers (including some on this list). That email is misleading and incorrect in some ways. Click here for more on that email.