It's been a roller coaster ride for consumers trying to figure out what to do with their Sharper Image gift cards.

When the overpriced gadget chain filed for bankruptcy, it declared that it would no longer accept its own gift cards. Then it sort of relented, agreeing to accept gift cards, provided that you bought an equal value of goods with cash. So if you had a $50 gift card, you would have to buy another $50 worth of stuff in order to use it.

Then the California state attorney general's office sought a temporary restraining order, seeking to block the company from requiring people to buy twice as much stuff in order to get what they'd paid for. But the Alameda County superior court refused to hear the case, saying that it didn't have jurisdiction because of Sharper Image's bankruptcy filing.

Check out the Wall Street Journal article (subscription required) for the legal details. Those issues aside, it seems that the consumer protection laws in this area are seriously lacking. People do not buy gift cards with the understanding that there is a possibility they will be stiffed in the way that banks do when they lend money.

Public companies are not even allowed to book a sale from a gift card until it's redeemed for merchandise. Given that, gift card purchases should be held in some kind of escrow account, and not released into the company's general ledger until the sale has been completed. The gift card money should be separate from the rest of the assets involved in the bankruptcy.

After receiving a well-deserved trashing from just about everyone -- myself included -- for its decision to stop accepting gift cards in the wake of its bankruptcy filing, The Sharper Image has decided it will start accepting them again. With some restriction.

In a press release issued early this morning, the retailer said that it will accept all gift cards for their full amount but that customers will be required to purchase double the value of the gift card. So when redeeming a $25 gift card, you have to buy an additional $25 worth of stuff for cash. Partial redemptions are not allowed but the company said customers are welcome to hold onto their gift cards and that it is working to ensure that, in the future, you'll be able to redeem your card with no restrictions.

It seems like sort of a bizarre compromise but it sort of makes sense as the company looks to liquidate inventory at the 96 locations it's looking to close.

My suggesting: If you have a Sharper Image gift card, save until the company hires a liquidator -- That's when the deals on useless high-tech gadgets you don't need will really start flowing. Elvis robot anyone?

I first got interested in the issue of companies deciding not to honor gift cards following bankruptcy filings when Bradlees tried to pull that nonsense back in 2000. The company reversed that decision after universal consumer outrage but at the time a spokesman for Eliot Spitzer's office said the company was within its rights:"Everything goes to the bankruptcy court, and there's a process in place for consumers to file a claim."

Now consumers with Sharper Image gift cards are in a similar situation after the company announced that it was suspending the acceptance of gift cards but reassured consumers that "We appreciate your understanding..." I'm sure plenty of customers were less than understanding.

I don't understand the logic behind this. Companies are not allowed to report a profit on the sale of a gift card until the it redeemed for merchandise. I would argue that the gift card money should be held in escrow for the consumers until the sale is made.

Gift cards are a great deal for businesses -- they give the company cash to use/earn interest on before they have to provide anything of value in return. Consumers shouldn't get the shaft when the company files for bankruptcy; they should get their money back before anyone else gets anything.

A recent survey revealed that approximately 27% of gift cards are never redeemed. In 2006, that came to over $8 billion in gifts that ended up going back to retailers. The most common reasons that respondents cited for not using their cards included that they never had time to shop or that they never found anything they liked.

Well, you can now chalk up another reason. In a follow up to last week's story about Sharper Image's decision to file for bankruptcy, the high-end retailer announced on Friday that it will no longer accept store gift cards, gift certificates, or merchandise credit.

This means that if you are currently holding any of these items, it is probably worthless. The bright side is that you may have a legitimate claim against Sharper Image's bankruptcy estate; the downside is that Wells Fargo is in line ahead of you, and it probably wants its $20 million back. You can fight over the remaining scraps. If any.

One of my favorite metaphors is the mine canary, the little songbirds that traditionally traveled with miners on their trips into the earth. The birds functioned as early warning detectors: if there was a buildup of poisonous gas, the canary would die from it very quickly, leaving the miner with enough time to escape relatively unscathed.

The miners' canary is particularly relevant now, as we seem to be approaching a recession. Given the increased costs of essential items, it seems likely that luxury items will become a much harder sell and stores which rely on them will start to have major cashflow problems.

Enter Sharper Image.