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Tis’ The Season: Holiday Gift Cards And Bankruptcy

Gift cards are not just for holidays anymore. As a stocking stuffer or a graduation present, gift cards make it easy for those who give and those who receive. We represent clients across the United States taking serious measures to reduce their debt, pay back creditors and improve their credit worthiness. But what measures do financially troubled businesses take when they sell gift cards but cannot deliver the goods?

Sen. Richard Blumenthal of Connecticut recently introduced the Gift Card Consumer Protection Act. The Act would protect consumers who purchase gift cards only to later discover expiration dates or business insolvency prevents them from redeeming the card value. The Act recognizes these points about gift cards:

  • Gift card use is widespread, but knowledge of expiration dates and usage fees are not
  • Gift cards allow businesses to capture and use dollars interest-free
  • Fairness prescribes gift cards be free of fees or expiration dates

For businesses undergoing reorganization through Chapter 11, handling millions of dollars in outstanding gift card balances can be challenging. In recent years, businesses like Sharper Image navigated gift card balances with the help of federal bankruptcy regulations. In November, AMF Bowling Worldwide, Inc. filed for Chapter 11 reorganization noting its intent to request permission from the bankruptcy trustee to honor gift cards.

In a tight economy, every dollar counts for consumers. When purchasing gift cards this season, watch for hidden fees and expiration dates to ensure your gift does not come with any strings attached. And if you are having financial troubles, consider contacting a bankruptcy lawyer.

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