Gift Card Alert: $75 million gift cards worthless?
March 05, 2008 in Bankruptcy & Gift Cards, General |
According to a story in the march 4th edition of the Chicago Tribune, an estimated $75 million worth of gift cards are at risk of becoming worthless as the companies that issued them file for bankruptcy. 
With 2008 retail bankruptcies and liquidations expected to reach the highest levels since the 1991 recession, consumers holding on to gift cards may soon find some of them worthless should the card issuers go under.
As explained in a previous post, when you purchase a gift card, you are essentially giving the card issuer an unsecured loan, which makes you a creditor to the company until you redeem the full value of the card. When the company files for bankruptcy, gift card redemptions are usually suspended and all creditors of the company must file their claims through the bankruptcy court.
As an unsecured creditor, your chance of getting your money back through the bankruptcy process is next to nothing. So, if you would rather not waste your money, consider using your gift card soon; especially if there are signs the company may not be around for long.
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Some e-commerce sites are trying to address this issue. for example http://www.howdiduknow.com allows people to send gift cards through their site, but the recipient doesn’t actually need to select and have their gift card delivered to them until they are ready to use it.
Thus, when you get a card, you can keep it virtually until you are ready to use it. If a company happens to go bankrupt during that time, you can just select a different card and then have it delivered to you.