American Signature Files for Bankruptcy, Your Order, and My Furniture Industry Forecast

The Prediction Confirmed: Why Retail Giants Fall to Chapter 11 Bankruptcy

The recent Chapter 11 filing by American Signature, Inc., the parent company behind Value City Furniture and American Signature Furniture, was sadly predictable as corporate bankruptcies continue to rise, as well as consumer bankruptcies. I have consistently pointed out over the last several months, dating back to my post about Home Goods’ Store bankruptcy filing, that the furniture industry would be facing economic challenges.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Why the Furniture Industry Was Poised for Bankruptcy

Two key factors are primarily responsible for the economic squeeze on furniture retailers:

Consumer Holding Back: When the economy feels unsure, consumers immediately hold onto their cash. High-ticket items like new furniture are the first purchases to be deferred.

A new sofa is expensive, and there are cheaper alternatives like using a slipcover or reupholstering it. With consumer confidence at a low and a lack of a positive future economic outlook, depressed consumer confidence directly ties to depressed sales.

The Tariff Effect: New and threatened tariffs on imported furniture and products disrupt the supply chain. The impact is clear: these tariffs add substantial costs to the retailer that either has to absorb the loss or pass on the expense to the consumer. Neither option favors the retailer.

The company is currently seeking to reorganize or sell via a Section 363 sale in the U.S. Bankruptcy Court for the District of Delaware (Case No. 25-12105). This means that for now, they will remain open, but what happens to pending orders?

What Happens to Your Furniture Order? The Law of Executory Contracts

If you placed a deposit or paid in full for furniture that has not been delivered, your purchase is considered an executory contract, a contract where both sides still have unfulfilled obligations.

In Chapter 11 bankruptcy, the company has the right to assume (honor and fulfill) or reject (cancel) these contracts.

The Legal Risk to Your Deposit with American Signature Furniture Filing for Bankruptcy

If the company rejects your order, for example, if the product is no longer available or the cost to fulfill is too high, your claim for the deposit could be converted into a pre-petition claim against the bankruptcy estate. You are no longer treated as a customer waiting for delivery, but as an unsecured creditor waiting for payment.

The Bankruptcy Code recognizes this possibility for consumers. Under 11 U.S.C. §507(a)(7), individual consumers who paid a deposit for goods for personal, family, or household use may have a priority unsecured claim up to a specific amount. The current statutory maximum priority is $3,800 as of April 1, 2025.

The problem is that any deposit or payment you made above the $3,800 limit falls into the lower class of general unsecured claims. In most large retail bankruptcies, these general claims receive pennies on the dollar, if anything at all.

Take Immediate Action: Steps for American Signature Customers

Given the fact that your deposit is at risk, you need to act quickly.

If You Paid with a Credit Card: Start the Chargeback Process

This is often the easiest and fastest path to recovery, and why I have always advocated paying for items with a credit card versus a debit card. If a debit card is used, you might not be reimbursed for months! I even faced this situation when I vacationed at a golf resort. There was a fraudulent charge of $600 on my debit card, and it took several months to get reimbursed.

By filing a chargeback claim with your credit card issuer, you are seeking to reverse the transaction based on the company’s failure to deliver the goods. You legally remove yourself from the bankruptcy process entirely.

There are often tight deadlines for credit card chargebacks (typically 60-120 days from the purchase or expected delivery date). Do not wait for the court’s official notice.

If Your Order is Cancelled: File a Proof of Claim

If you paid by cash, debit card, or if your chargeback is denied, you must file a Proof of Claim with the Delaware bankruptcy court.

Case Details: The American Signature, Inc. cases are jointly administered under Case No. 25-12105 in the U.S. Bankruptcy Court for the District of Delaware.

The Bar Date: You must file your claim before the bar date, which is the deadline set by the court. Failure to do so means you forfeit your right to any recovery. You must monitor the official case website to find this deadline. You can use this video I posted on my YouTube channel to better understand how to use the Court’s website PACER.gov.

Make sure that in your proof of claim that you include the deposit amount, the date you paid, and supporting documentation.

Use Gift Cards Immediately (If You Can)

Gift cards purchased before the bankruptcy filing are also typically treated as general unsecured claims. While the company is operating, your best chance of maximizing its value is to use it immediately to purchase available inventory. In the event of a sale or liquidation, the value of the cards can be lost quickly.

The Professor’s Take

The American Signature Chapter 11 case shows why it’s important to understand consumer protection laws in corporate bankruptcy to protect your interests.

Whether you are a debtor facing financial hardship or simply a consumer trying to navigate a store’s bankruptcy, the law distinguishes between an unsecured promise like a deposit or a gift card and a protected asset.

By acting quickly and asserting your rights under 11 U.S.C. § 507(a)(7), or proceeding with a credit card chargeback, you can often keep a significant portion of your money from being swept into the bankruptcy estate.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.