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Can I still use my gift card to a retailer that is bankrupt?

Gift cards can be a very useful holiday gift. The gift-giver can pick one up at the last minute, and the lucky recipient can spend it on whatever they want. With a wide variety of retailers to choose from, the possibilities for gift cards seem limitless.

This year, however, a spate of retail bankruptcies has made using gift cards a bit complicated. Several major retailers filed for bankruptcy in 2017, and more may follow in the year to come. Many consumers are questioning whether the gift cards that they received for the holidays will still be valid at a bankrupt store.

Will my gift card be affected?

If a business is having financial trouble, it does not necessarily mean that it will declare bankruptcy. Some companies merely have shaky credit ratings that they need to improve; others need to reduce their debt. Still, there are some retailers that simply cannot avoid going bankrupt. When a retailer files for bankruptcy, the banks count any outstanding gift cards as unsecured debt. That means that the money on gift cards is not guaranteed protection under bankruptcy law. If a business liquidates, customers may not be able to redeem their cards.

Don’t worry just yet: This does not necessarily mean that your card is worthless. If a retailer does declare bankruptcy, it will usually ask the court to allow it to fulfill any outstanding gift cards. This is meant as a show of good faith to customers that their gift cards will be honored, even through the bankruptcy process. Most courts permit retailers to honor the outstanding gift cards, thereby preventing consumers from losing money.

Use your gift card now

If you have a gift card to a retailer that is struggling financially or has declared bankruptcy, the best thing to do is go out and use it now. Don’t let it sit around gathering dust. The best way to ensure that you will be able to redeem your gift card is to use it right away.

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William T. Peckham
1104 Nueces Street, Suite 104
Austin, TX 78701
Phone: 512-487-7604
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