What Happens When Your Cruise Line Suddenly Goes Bust?

When luxury cruise line Crystal Cruises ceased operations last week, numerous future passengers still had deposits and future cruise credits tied up with the line. Can they get their money back?

What Happens When Your Cruise Line Suddenly Goes Bust?

Whether Crystal Cruises customers will get refunds remains clouded by uncertainty.

Photo by Shutterstock

Luxury cruise line Crystal Cruises shuttered its doors last week. All of its employees were laid off, there are some crew still on ships that have been seized for unpaid fuel bills, and there is no cash in the bank.

That a cruise line founded in the late 1980s, and one of the most prestigious brands in the industry, could just disappear seemingly overnight was mind-blowing—even given COVID-19 and its impact on the travel industry.

Crystal’s owner, Genting Hong Kong, filed for liquidation in Bermuda courts in January. Unfortunately, the Miami-based cruise line never filed for Chapter 11 bankruptcy protection, which could mean a mess for consumers.

Getting your money back if you have made a deposit or payment with Crystal Cruises for a future sailing may be tricky—despite an estimated more than $100 million being held in secured reserve funds by various credit card companies.

Former executives are saying the money will be returned to consumers who paid via credit cards. Washington, D.C.-based travel lawyer Mark Pestronk says it isn’t quite that cut and dried.

“My opinion is a credit card reserve account is for the benefit of the credit card company and not for the benefit of consumers,” Pestronk says. “Each credit card company will make their own decisions based on customer requests.”

Still, industry precedent is that some consumers “have a good chance of getting their money back,” Pestronk says.

Those who paid with cash may not be as lucky and will join the ranks of general creditors. Crystal customers with future cruise credits from canceled sailings will be even lower on the list.

“It is just so sad. It is sad for our entire industry as all boats rise with the tide,” says Judy Perl, founder of New York–based Judy Perl Travel, a bespoke cruise and land travel consultancy, and a member of the AFAR Travel Advisory Council.

Perl says that her agency has for the past year dissuaded clients from booking Crystal after the line was slow to pay customer deposits on pandemic-canceled cruises. “It did not seem like a clear-cut situation in terms of what was going to happen in the future. It turned out to be a good premonition for us,” says Perl.

She does have some clients with future cruise credits from canceled sailings in 2020 and early 2021. Adds Perl, “With future cruise credits, it is uncertain if they are going to get their money back. We remain optimistic. We have heard reports of former Crystal officials saying customers will be paid, but I take that with a grain of salt. We’ll see what happens.”

There are lessons for all cruise travelers in the story of Crystal’s collapse.

How Crystal courted loyal fans

Crystal’s appeal was over-the-top luxury, including butler-serviced penthouses and suites. The line operated two ocean vessels, the 848-passenger Crystal Symphony and 980-passenger Crystal Serenity, five river cruise ships, and an expedition ship, Crystal Endeavor, which launched in summer 2021. All were hailed as best in their class.

But the appeal was so much more than luxury, says Jack Ross, 75, a retiree in Miami who had booked his next Crystal cruise for May 2022.

“It was about the crew,” Ross says. “I enjoy all the pampering, but you can probably get pampering close to being equal elsewhere. It was more like they were treating you like family.”

Now, he says of the line’s quick demise, “It’s like a grieving process. It’s sad.”

Ross and his wife, Vicki, put down a deposit of $2,100 for a cruise from Los Angeles to Hawai‘i. It may be lost money.

“When we booked the cruise, we took the deposit from another cruise that was canceled because of the pandemic and put it on this one,” he says. “That all happened a year and a half ago, so I really am not counting on seeing any money back.”

The reality for consumers

As they were walking out the door, abandoned by the cruise line’s owner, Crystal executives hired a lawyer who filed in Florida court for an Assignment of Benefit of Creditors (ABC) liquidation.

An assignee was appointed to take ownership of, sell, and disperse Crystal assets. It was a last-ditch effort to protect consumers, travel agents, employees, and vendors owed money. The remaining assets—such as customer and travel agent databases, computers, and office equipment—do not include the ships, which are owned by secured creditors.

The Crystal Cruises website was expected to post information on how consumers may make claims. As of February 16, there was no such information online.

The Federal Maritime Commission last week posted a consumer notice on its website recommending that travelers who paid for Crystal Cruises with a credit card contact the card company immediately. Ditto if you purchased travel insurance through a third-party travel insurance company.

Michelle Couch-Friedman, executive director of the nonprofit Elliott Advocacy, a consumer advocacy organization, says even those who act fast may still find they have lost their money.

“Whatever is happening is not good for consumers,” Couch-Friedman says. “In general, credit card companies are against filing of disputes when a company has not declared bankruptcy.”

Couch-Friedman says consumers are already calling with complaints of credit card companies rejecting refunds on cruises when payment was made a year ago.

“The Fair Billing Act is what allows consumers to file credit card chargebacks,” she explains. “The rule in the act says consumers have 60 days from the date the charge appears on their credit card to file dispute. The issue here is people make the credit card deposits with a company such as Crystal sometimes two years in advance.”

If you call your credit card company, be very insistent, she recommends. “Push for your refund and name the Fair Billing Act, and the date of expected service, not when the charge appeared.”

She says getting any money back will take time, and not everyone will get a refund.

If you paid cash for your cruise, ask your bank for help. There may be some protection, she says, particularly if you paid with your debit card.

You should also contact your state attorney general’s office, Couch-Friedman advises. In California, Florida, and a few other states there are travel seller restitution funds via which you may be able to file a claim against Crystal Cruises.

What about future cruise credits?

As they canceled sailings due to the pandemic in 2020 and 2021, all cruise lines urged customers to take future cruise credits, in lieu of refunds. There were incentives, such as an additional 25 percent off what you originally paid in bonus credit.

If you took the deal with Crystal, what you have now is a useless voucher.

“It’s a more difficult situation,” says Couch-Friedman. “Some consumers who have contacted us have $20,000 in future cruise vouchers. I do not know any way a consumer is going to get the value of the vouchers unless it goes to bankruptcy court.”

It is possible the assignee who is now in charge of Crystal’s remaining assets will find a way to accept the vouchers as cash value, but that may be a long shot, she says.

“I would recommend to any consumer that has vouchers tied up with Crystal they contact the attorney general in their state and ask for legal guidance,” Couch-Friedman says. “There is no clear pathway that we can set a consumer on who has a voucher.”

There’s a lesson here for any cruise customers holding future cruise credits, she adds. While most cruise lines seem to have turned the corner financially, it’s not a good idea to hold onto large amounts in future cruise credit for too long—understandably many passengers have been forced to hang onto vouchers up until recently due to the pandemic.

“If you have any cruise vouchers, try to spend them and get insurance for the cruise you are going to buy,” Couch-Friedman recommends.

>> Next: What Credit Cards Provide the Best Travel Insurance?

Fran Golden covers cruises for AFAR.
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