Obtaining Crystal refunds not as easy as ABC

Mark Pestronk

Q: I just read that Crystal Cruises initiated a court proceeding called an “assignment for the benefit of creditors” in Florida. Is that proceeding the same as bankruptcy? If not, what’s the difference? I assume that clients who paid by credit card will eventually get their money back from their card companies, but will the case help our agency’s clients who paid by check? What about all our clients who hold future cruise credits but haven’t booked a specific cruise? What about commissions owed to our agency?

A: Bankruptcy is governed by federal law, and bankruptcy cases are handled exclusively by federal courts. In state courts, the near-equivalent of bankruptcy is called assignment for the benefit of creditors, or ABC.

An article in Seatrade Cruise News explains the reason for the ABC choice as follows:

“Crystal management viewed filing for Chapter 11 bankruptcy protection in the U.S. as the best course under the circumstances. That would have required some funds to carry out the process …. At the end, out of money, Crystal was able to get advice from a law firm to which it had earlier paid a retainer that wasn’t fully used. That is how the ABC filing in Florida came about.”

So, if Crystal did not even have enough money to pay an attorney to file a bankruptcy case in federal court, the prospects for your agency’s non-credit-card clients look bleak, indeed. 

  • Related: Federal agency offers guidance on Crystal Cruises refunds

Crystal’s assets do not include the ships, and according to an article in Afar, the remaining assets are nothing more than “customer and travel agent databases, computers and office equipment.”

In an ABC case, an “assignee” takes over the company and liquidates it, giving priority to the following claims in the following order: 1) secured creditor claims, 2) administrative claims, 3) government claims, 4) wages and 5) general, unsecured creditors. Claimants in each category get money only after the claimants in the higher categories are paid in full. Within each category, claimants get only a prorated portion depending on how much money is left.

So, clients who paid for future cruises, clients who hold future cruise credits and travel agencies that are owed commissions are all probably in category 5. The chances of category 5 creditors getting any money at all from the case certainly are low, even if a purchaser buys the remaining assets in the ABC case.

One more avenue for possible refunds is the cruise line’s bond on file with the Federal Maritime Commission (FMC). According to the commission’s website, “FMC requires cruise lines to have a bond or other financial surety available to refund passenger deposits in the event of nonperformance …. This requirement applies to cruise lines that embark from a U.S. port and have at least 50 berth accommodations.

“The company that issues the bond or other financial surety processes claims made for cruise nonperformance or death or injury. For more information on the FMC’s financial responsibility requirements or to obtain information on filing a claim, please contact the Bureau of Licensing and Certification.” 

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