What Happens to Gift Cards When Retailers Go Bankrupt?

A new report underscores the importance of using gift cards within a year or so of receiving them – even when there is no official time limit on the card.

The reason for acting fast: the retailer that issued the card may go bankrupt, leaving the card-holder high and dry.

This report, from Research and Markets, is called “Retailer Bankruptcies: Are Gift Card Holders Just Another Class of Creditor?” It looks at cases of retailer bankruptcy and reviews what happened to gift cards in each case.

Some of the companies discussed include:

  • Borders
  • Brookstone
  • RadioShack
  • Sharper Image
  • Sports Authority
  • TSA Stores

Not all bankruptcies play out the same way, and in some cases retailers work to protect their cardholders.

This is smart, since a little loyalty toward customers can go a long way when a company is trying to emerge from bankruptcy.

However, one key feature in a bankruptcy proceeding is that the company under protection quickly loses control of the game. Large creditors, and those providing exit financing, become the “big dogs” in the process.

Bottom line: use that gift card as fast as you can.

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