What to do With Gift Cards From a Store That May Go Bankrupt

You’ve just learned that a retailer is having financial trouble and you have their gift cards. Here’s what to do with those gift cards from a store that may go bankrupt.

If you’re anything like me, you may let gift cards sit around for a while. Even if you get a gift card to a retailer you like, you wait to use it until you really want something. And, generally, that’s not a bad thing. Retailers are generally pretty good about honoring gift cards even years after they were first issued. (Though you definitely want to check the fine print on the card before you hold onto it that long!)

But what if you find out the company whose gift card you have is about to file for bankruptcy or has filed already? This happened to loads of consumers in 2015 when RadioShack filed for bankruptcy.

If you hear that a store is filing bankruptcy and you have their gift cards lying around, one thing is for sure. You should use them quickly.

That’s because it’s hard to tell exactly what will happen after the company files bankruptcy. In some cases, the courts will resolve the bankruptcy with the business still intact and honoring outstanding gift cards. In other cases, the company will shut down as part of the bankruptcy.

In the case of RadioShack, consumers wound up with just a few weeks to use their gift cards before the company would no longer honor them.

Typically, the courts get to decide how long outstanding gift cards will be honored when a retailer files for bankruptcy. Gift cards are considered unsecured outstanding debt. So they may or may not be usable once a retailer files bankruptcy. Often times, though, the courts will give consumers a limited time frame in which to spend the gift cards.

So whenever you hear a popular retailer has filed for bankruptcy, check your wallet, your sock drawer, and under your bed. See if you have any gift cards with a balance. And then take these steps:

1. Check out how long gift cards will be honored

First thing’s first. Figure out how long you have to spend that gift card. Again, the courts will generally decide how long the company is able to honor gift cards. Generally, you’ll want to spend the money sooner than later just to be safe. But you might be able to wait a week or two to see if you can get a better deal on products the company is marking down as part of its liquidation process.

Just be sure you spend that money well ahead of the actual deadline. That way you’re sure the money will be available. And you won’t get stuck spending it on the dregs of what’s left over after the liquidation sales begin in earnest.

2. Buy things you need anyway

I tend to hold on to gift cards to purchase things that I want but wouldn’t necessarily buy for myself. Or I might use a gift card to upgrade a purchase I need anyway but wouldn’t pay extra for a premium product. If I need new sheets, I might use a gift card to upgrade them from the basic level to the premium quality, for instance.

This strategy means I end up holding on to gift cards for a while. And that’s not a good thing when dealing with a company that’s filed for bankruptcy.

In this case, try to look for things you need, anyway, and just spend that money on those things. Even if the item doesn’t count as a “need” right now, consider purchasing it if you know you’ll need it within the next six months. Then you can spend the gift card without actually wasting the money on something you’ll never use.

3. Stock up on things you’ll eventually use

In a similar vein, you can use a gift card to stock up on things you’ll use eventually. For instance, old RadioShack customers may have used their gift cards to stock up on electronic essentials like phone chargers and protective cases. Maybe all your chargers are working now, but you know you buy replacements every few months, anyway.

4. Purchase gifts ahead of time

Expiring gift cards are a great way to purchase gifts well ahead of time. If you can’t find anything you want or need from the store in question, consider upcoming holidays and birthdays. Maybe you can purchase gifts for your kids or loved ones for the holidays.

Or maybe you already have some money set aside for a specific gift purchase, but not enough to buy it in full. Add the gift card to your total, and go ahead and purchase that gift while the card is still usable.

5. Purchase items to donate or resell

If you truly can’t find something you want or need, will eventually need, or want to give as a gift, you can at least buy items to donate or resell.

If your plan is to donate, ask your favorite non-profit what they might use from the store in question. Use your gift card to buy it, and then hand it over to the non-profit. You can at least take a tax write off!

If the plan is to resell, look into the market for items from that store. Check eBay and Craigslist to see what people want from a store like the one in question. Then you can buy items that you neither want nor need, but you can at least get some cash back when you sell them to someone else. This is an even better deal if you can buy the item in question at a lower liquidation price and then even resell for a profit.

When you hear a store is filing for bankruptcy and you have gift cards from there, don’t panic. But do follow these steps to use those gift cards well before you run out of time.