What happens if my cruise line goes bankrupt or shuts down?

When Susan Group and her husband booked their summer vacation last year, they never considered that the cruise line could go bankrupt. But that's exactly what happened.

The couple had been looking forward to sailing from Lisbon to London aboard Crystal Cruises’ Crystal Symphony in a deluxe veranda cabin. Those plans ended abruptly when the cruise line canceled their trip and suddenly shut down.

That left the Groups wondering how to get their money back from the bankrupt cruise line. They weren't the only ones with that question.

The pandemic has been particularly hard on the cruise industry. Eleven cruise lines have gone out of business during the global crisis. Unfortunately, each time one of those companies sank, thousands of blindsided customers were inevitably left behind empty-handed – no cruise and no refund.

Those losses didn't have to happen.

Here's what you can do before and after a cruise line declares bankruptcy to reduce your chances of bearing the financial brunt of the company's shutdown.

Protect your cruise investment during the planning process

Protecting yourself against losing your money to a cruise line's insolvency begins in the planning phases of your trip.

Use a professional travel advisor

One way to ensure you don't book your next cruise with a line teetering on the edge of extinction is by using a travel advisor. Those professionals are in the know and won't book their clients on cruise lines in immediate danger of going under.

You can find a professional travel advisor specializing in cruises on the American Society of Travel Advisors website.

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Related: Is it better to book a cruise through a travel agent? We say yes

Do your research about the cruise line

If you're doing your own travel planning, it's imperative that you do some basic research before booking anything.

Although bankruptcies and shutdowns often seem sudden to consumers, they really aren't — and the internet will tell the tale. In today's digital age, it's nearly impossible for a cruise line to hide its financial problems from the world.

Looking through online cruise communities such as Tripadvisor, Cruise Critic and others will give you an idea if the cruise line you're considering is on the verge of collapse. Remember that complaints do not always come in chronological order, so you may need to scroll around.

Don't be lured by an unbelievable deal

Sure, everyone wants a great deal, but some deals should be avoided. If a cruise line that typically sells luxury tours that cost $15,000 or more starts offering the same trips for $5,000, don't fall for it.

Cruise lines on the brink of bankruptcy often offer unbelievable deals to generate revenue. The appearance of heavily discounted trips — especially ones in which the customers are expected to pay in cash — is always a giant red flag.

Related: How to get a deal on a cruise

Purchase travel insurance that includes bankruptcy protection

Many cruise ship passengers do not consider their need for travel insurance until it's too late. I often receive requests for help from troubled travelers who didn't purchase travel insurance but then find themselves in a situation where they need it.

Taking a cruise without the protection of travel insurance is a bad idea. A comprehensive travel insurance policy can cover a passenger for medical treatment aboard the ship, trip delays, cancellations, medical evacuation and, yes, even bankruptcy of the cruise line.

Related: Best cruise travel insurance plans

Using a site such as InsureMyTrip, you can compare various policies based on your personal information and pick one that provides the coverage you need.

It's important to note that not all travel insurance policies provide bankruptcy protection, so it is critical to review the document carefully.

Generally, you have 10-14 days after purchase to read that policy in its entirety before it becomes nonrefundable. During that time, you'll want to verify the policy contains the bankruptcy clause that will allow you to file a claim should your cruise line go belly-up before your trip.

Do not purchase a 'waiver product' from your tour operator

If you book directly with a private tour operator or cruise line, you may be offered a hybrid type of travel protection sold by the company. These are waiver products, and they can give the unaware customer the impression that they've purchased traditional travel insurance when they haven't.

A cancel-for-any-reason waiver product, such as the one Vantage Deluxe World Travel sold to its customers, is problematic in significant ways. As many of its customers were disturbed to find out after purchase, if the traveler canceled their cruise for a covered reason, Vantage was responsible for paying the claim. If the passenger canceled for any other reason, Vantage was responsible for providing a future trip.

This type of travel protection is particularly precarious if the tour operator is in financial distress.

If you are insured by a cruise line or tour operator, and it goes bankrupt or ceases to operate, you'll have no protection at all. Always outsource your travel insurance to a neutral third party, and make sure to read and understand the policy.

When you buy directly from a travel insurance provider, you will almost always spend less and receive a more comprehensive policy.

Related: 10 mistakes to avoid when booking your cruise

Pay for your cruise with a credit card

Some troubled cruise lines and tour operators will offer significant discounts to customers willing to pay for their trip with a bank transfer. This is almost always a mistake for the customer — especially if the company has financial difficulties and could go bankrupt before you take your trip.

The Fair Credit Billing Act allows consumers who pay for goods and services with a credit card to request a chargeback if the merchant doesn't hold up its end of the transaction.

Related: Use these credit cards to maximize your next cruise vacation

If you pay for your cruise with a credit card, you will have the power of the FCBA behind you. Your credit card company will be able to reverse those charges should your cruise line be unable to provide the trip you purchased.

Remember, the FCBA doesn't apply to debit card purchases, checks or bank transfers.

Read and print your cruise contract

Recently, unusual requests for help from customers of Vantage Travel have hit my inbox. The tour operator canceled these confused customers’ cruises and then deleted the online paper trail associated with the trip — including their trip itineraries and invoices.

Consumers should always download their contract and any additional correspondence and make hard copies. If a cruise line goes bankrupt or ceases to operate, your online details can quickly become inaccessible. If you need to prove what you are owed later, you will need that documentation.

How to get your money back after a cruise line announces its bankruptcy

If the worst happens and your cruise line goes bankrupt or ceases to operate, and you've followed the pre-booking guidance, you'll be in a favorable position to get your money back. But even if you've made some missteps along the way or booked so far ahead that it was impossible to predict your cruise line’s possible demise, you can still do some things to claw back your cash.

File a credit card dispute

This one is easy. If you've paid for your cruise with a credit card and the line ceases to operate and cancels your trip, you can file a chargeback. Your credit card company will protect you — at least it should.

Unfortunately, I know from experience that sometimes when consumers ask their credit card companies to begin a chargeback investigation, they may be given inaccurate guidance from the front-line customer service representatives. That’s because those agents may not be completely familiar with the Fair Credit Billing Act and the protection it provides for consumers.

The customer service representatives may erroneously cite a 60-day time limit from the date that the consumer first made the purchase to file a dispute. If this happens, ask to speak to a supervisor and let that person know that you are aware of your rights under the Fair Credit Billing Act.

Related: What is the Fair Credit Billing Act, and how does it affect consumers?

As a consumer advocate, I’ve spoken to numerous bank executives who have repeatedly assured me that the chargeback deadline for consumers is based on the expected date of service. This is an important detail for cruise line passengers, who often purchase trips months or years before the scheduled departure date.

If your cruise line cancels your trip and doesn’t promptly refund your cash, here’s how to file your credit card dispute:

• Call the number on the back of your credit card to open the dispute.
• Your bank will ask you to upload your proof of cancellation and other supporting evidence into the online portal.
• You will receive a conditional credit while the bank conducts its investigation.
• Your cruise line will have 30 days to respond to the dispute.
• If the cruise line doesn’t provide evidence to your bank supporting the charge during that time, the conditional credit will become permanent.

Ask your bank to reverse the transfer

If you've paid for your trip in the past 60 days with a direct transfer, your bank may be able to help. Contact your bank ASAP if your cruise line goes bankrupt, declares insolvency or ceases to operate, and you've made a bank transfer to the company in the past 60 days.

File a travel insurance claim

If you've purchased a travel insurance policy that includes a bankruptcy or insolvency clause, it's time to contact your provider. In some cases, you may need to wait until the company officially files for bankruptcy, or you may be able to file a claim based on "cessation of operations." Check the specific language in your policy.

Check if your state has a Seller of Travel retribution fund

Only five states have Seller of Travel laws (California, Florida, Hawaii, Iowa and Washington). These laws require Sellers of Travel to register and, in some cases, pay into a retribution fund to protect consumers from the fallout of a potential bankruptcy of the operator.

Check with your state's attorney general to find out if your state has such a fund and if your situation qualifies.

Join the bankruptcy class

For consumers, the worst route to a refund when a cruise line goes bankrupt is joining the bankruptcy class. If that's all that is available in your situation, then you'll need to lower your expectations going into the ordeal.

Bankruptcy proceedings can take months and even years to resolve. Worse, consumers are always last on the list when the settlement eventually comes. As unsecured creditors, customers will stand behind vendors, lawyers and other secured creditors.

Once bankruptcy is announced, you will likely receive a postcard notification inviting you to join the class with instructions on how to do it.

Set a Google alert

If a bankrupt cruise line has not kept careful records, not all customers will receive a timely announcement about the case. If you are affected by a company’s impending bankruptcy, you should set a Google notification to alert you whenever the business is mentioned in the news. That way you will not miss out on any important information or deadlines to claim any compensation you may be owed.

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