I have a gift card for a company that has declared bankruptcy. Is my gift card still good or is it useless now?

If you are left with gift cards to a business that declares bankruptcy you are probably concerned about whether those gift cards are going to be useless or if you will be able to use them or redeem their value. The answer is that it depends on the relevant gift card law and the company's situation as determined by the assets of the company and the type of bankruptcy being filed.

Gift Card Law and Bankruptcy

Bankruptcy law permits a company that files for bankruptcy protection to stop honoring gift cards, but in some cases a company may continue to do so, at least for a while. Whether or not this is the case will depend primarily on the type of bankruptcy the business has filed. 

• In a Chapter 11 bankruptcy, the business enters into bankruptcy solely to restructure its debts. It intends to remain in business and to continue to operate as a business, even while in bankruptcy re-organization. In many Chapter 11 bankruptcies the company/debtor will continue to honor gift cards because it wants to keep its customer base. 
• In a Chapter 7 bankruptcy, the business will cease to exist at the end of the bankruptcy. Much like a Chapter 7 filed by a private citizen, the business will have to turn over its assets (the things of value that belong to the business entity) and those assets will be sold to repay the creditors to whom the business owes money. At the end of the bankruptcy, the debts will be forgiven, the assets will be gone and the business will no longer operate as a business entity. In a Chapter 7, it is more rare for a company to honor gift cards because they don't need to keep their customer base. Further, if you haven't made your claim before or during the bankruptcy, there will be no store left for you to use your gift card at. 

Getting Help: Filing a Bankruptcy Proof of Claim

If you hold a gift card (or gift certificate) from a bankrupt company you are essentially considered to be a creditor (albeit one with a relatively low priority claim) by the bankruptcy court. This means you can file a bankrtuptcy Proof of Claim with the court. In order to do so, you may obtain the form from the clerk of the bankruptcy court or from the court's website. Of course, companies in bankruptcy are short on assets, so you may not get anything for your claim. If you are considering filing a bankruptcy proof of claim against a company to try to recoup the value of your gift card, you may wish to speak with a debt settlement attorney about the process of doing so.