What to Do with Gift Cards to Businesses That Are Out of Business

Man holding a Gift CardGift cards are always popular gift choices. They’re appropriate for any occasion, they never go out of style and they never lose their value. That is, of course, until the store that issued the gift card goes out of business. At this point, shoppers have a few options. Many simply choose to throw away their store credits, assuming their money is gone forever.

While these consumers aren’t entirely wrong, there are exceptions. In some cases of bankruptcy or shutting down, stores may still accept gift cards for their full or partial values until they close their doors for good.

When a Store Closes

If a store is planning on shuttering its doors, you may still be able to redeem your gift cards before it closes for good. Check with the store to find out if they are redeemable. You may be able to use the full amount on the gift card or a certain percentage. In some cases, your gift cards won’t be usable at all.

This all depends on the store and the reason it is closing. When companies file for bankruptcy, they can only continue accepting gift cards if they ask the bankruptcy court for permission and the court authorizes it. So, companies that declare bankruptcy may be less likely to honor gift cards than companies that are going out of business for other reasons.

When Your Gift Cards are Unusable

You still have options even if the store won’t accept your gift card. In some cases, you may be able to exchange it for a gift card to a different store or get a refund.

If you’re left with seemingly useless gift cards, try the following strategies:
  • If you purchased gift cards from a vendor rather than from the store itself, contact the vendor. You may be allowed to redeem the card’s value for a card at a different store.
  • If you paid for the cards with a credit card, contact your credit card company. In some cases, consumer protection laws may qualify you for a full refund.
  • Try using the gift card at a former competitor. The competing store has no obligation to honor the card and may not even have the means to do so. However, in some cases, stores accept their competitors’ gift cards or give you discounts in exchange for them. In these ways, they try to earn you as a customer.
  • Hold on to the gift cards, although they may be useless now. Some companies emerge from bankruptcy and resume business. When this happens, they may accept old gift cards that were issued prior to the bankruptcy.

If all else fails, you can always bring the issue to a court or a government official. If your card is for a small or locally-owned business, petition your state’s attorney general. The Attorney General’s Office may be able to force the business to honor gift cards.

For larger corporations, you can file a claim in court for the amount your gift card is worth. This requires a bit of an understanding of the bankruptcy process. When a company goes bankrupt and closes its doors for good, its assets are sold off and the profits are used to repay creditors. You would essentially be claiming yourself as a creditor because the company owes you money.

While you may receive a refund, it is unlikely because unsecured creditors such as gift card holders are the lowest priority. You won’t be repaid unless money is leftover after all other creditors — such as suppliers and business loan holders—are repaid.

Next time you purchase a gift card, you may want to go with an established national retailer — just to be safe.

Bill Fay

Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at Debt.org is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at bfay@debt.org.

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