Everyone has at least one or two unused gift cards sitting in their wallet. Some have expiration dates, while others have a balance that is permanent in most circumstances. If a company files bankruptcy, it is extremely difficult to get compensation for the value of the gift card.With the spread of coronavirus slashing profits for businesses of all industries, you should be keeping an eye out for business bankruptcy filings in case you have gift cards with any of them.
Businesses that have declared bankruptcy and are closing- SPEND
- Pier 1 Imports: Gift cards to this retailer are only good for 21 days after the location you are seeking to spend it in has reopened from COVID-19. In some areas, it may already be too late to spend your gift card in person. Pier 1 does have a website for online shopping.
- Modell’s Sporting Goods: This sports retailer filed for Chapter 11 bankruptcy in March and has been closing its stores since then. If you have a gift card for this business, spend it now.
- Chuck E. Cheese: The pizza restaurant that specializes in children’s birthday parties is shutting down for good.
Restructuring through Chapter 11- be ready to spend
- JC Penney
- Neiman Marcus
- J. Crew
- True Religion: This is the company’s second bankruptcy in recent history.
- Hertz Rental Cars: The rental car company is considering selling some of its fleet, which consists of more than 500,000 vehicles.
- Gold’s Gym: The gym chain offers merchandise for those who still aren’t comfortable going to a gym.
Considering bankruptcy- don’t buy gift cards
- Rite Aid
- AMC Movie Theaters
- Victoria’s Secret
- Sur La Table: The high end home goods company also offers cooking courses that you can use your gift card balance on.
What happens if I have a gift card with a remaining balance after the business permanently closes?
For the most part, you are out of luck. You need to spend the remaining balance on your gift card before the company goes out of business. If you don’t spend the gift card in time, your only method of recourse is to file a claim with the bankruptcy trustee. This is a legal filing to let the bankruptcy court know that the company owes you money. This is highly unlikely to result in you having the balance refunded to you. The company’s creditors will be paid in order of priority, and gift card holders are low priority creditors. If you want to proceed anyway, you will need to check where the case was filed and look up who the trustee is. The Bankruptcy Trustee will have information available about how to proceed with filing a claim. Overall, your best bet is to use the gift card once you know the business is closing.
What about rewards balances?
The chances of collecting from a gift card bankruptcy claim are already miniscule. You will not be able to collect any unused loyalty or rewards points you may have accrued with a bankrupt company. If you have any unused loyalty or rewards points with a company that has filed bankruptcy or is considering filing, you need to spend the points as soon as possible if you don’t want to lose them.
Do I still have to pay back my store credit cards?
If you have a store credit card, your line of credit doesn’t come from the store itself, but rather a bank or other financial institution. These financial institutions aren’t going to just forgive any balance remaining on your store credit cards just because the company filed bankruptcy- the bankrupt company probably already owes them debts that are about to be discharged. The lender will still pursue you for the debt, and credit card companies’ favorite method of debt collection is wage garnishment.
If you fail to pay a credit card balance, the lender will eventually get a judgment against you, leading to a wage garnishment, which will take 25% out of your paycheck until the debt is satisfied. For minimal negative effects on your credit, you should pay off your store credit cards as soon as possible after learning of a bankruptcy filing.