04/28/2010
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By Lance N. Portman
Gift cards issued by stores, spas or restaurants are extremely convenient and popular.
As evidenced by the billions of dollars Americans spend on them each year, gift cards to stores, spas or restaurants are extremely convenient and popular. However, if the retailer goes bankrupt, the gift card may be of limited or no value.
If the retailer filed for Chapter 7 bankruptcy, the doors are shut and the assets of the business are liquidated by a trustee who (hopefully) makes payments to creditors. As the holder of the gift card, you are a creditor. You should file with the Bankruptcy Court a priority unsecured Proof of Claim in the amount of the unused portion of the gift card up to the amount of $2,425 under 11 USC Section 507(a)(7). Any amount over $2,425 is filed as a general unsecured claim. This is a gamble - you may never receive any money on your claim.If you are lucky, the retailer filed for Chapter 11 bankruptcy, and therefore is still in business as it attempts to reorganize. To honor any gift card purchased prior to the bankruptcy, the retailer must first obtain court permission to do so. If the retailer obtains permission, you should spend the card as quickly as possible. If you are unable to use the gift card, then as a creditor and consumer, you should file a Proof of Claim. With Chapter 11, there is a slightly better, but not great, chance of someday receiving some money back.
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