Are gift cards still valid when a business files bankruptcy?
A store you have a gift card for just announced it filed for bankruptcy. Can you still use the card? And if the store stops taking it, is the money gone?
The answer depends on the type of bankruptcy, what the court allows, and what kind of card you have. This explainer covers how gift cards are usually handled in a bankruptcy case and what to do if yours is no longer accepted. It is general information, not legal advice.
KEY TAKEAWAYS
- A bankruptcy filing does not automatically cancel gift cards, but the business needs the court’s approval to keep honoring them.
- Businesses that are reorganizing often keep accepting gift cards. Businesses that are liquidating may accept them only for a short time, or with limits.
- Once a store stops accepting cards, the remaining balance is usually a claim in the bankruptcy case, and claims often pay little or nothing.
- Visa, Mastercard, and other bank-issued gift cards are separate from any one store and are generally not affected by a retailer’s bankruptcy.
The short answer
A bankruptcy filing does not automatically cancel gift cards. But once a business is in bankruptcy, it generally needs the court’s permission to keep honoring customer programs like gift cards. Whether it asks for that permission, and on what terms, depends on whether it plans to stay in business.
| Type of case | What it means for the business | What it often means for gift cards |
|---|---|---|
| Chapter 11 (reorganization) | The business generally keeps operating while it works out a plan to pay creditors. | Many businesses ask the court for permission to keep honoring gift cards to hold on to customers. Limits or a cutoff date may apply. |
| Chapter 11 with store closings or a sale | Some or all locations close, or the business is sold. | Gift cards may be accepted for a limited period. A buyer may or may not agree to honor them. |
| Chapter 7 (liquidation) | A trustee sells the business’s assets and the business stops operating. | Cards usually stop being accepted. Holders may be able to file a claim. |
General patterns only. What happens to gift cards in a specific case depends on the court’s orders, which are posted in the case records.
Why the court decides
When a business files for bankruptcy, its money and property become part of the bankruptcy estate, which is used to pay creditors under the court’s supervision. Honoring a gift card means giving away goods for money the business already collected, so it is treated as paying an old debt. That is why a business usually asks the court, often in the first days of the case, for permission to keep accepting gift cards.
A business that is reorganizing under Chapter 11 has a strong reason to ask: refusing gift cards drives away the customers it needs. A business that is closing has less reason, and may accept cards only during a short closing period or with conditions. In past cases, some retailers allowed gift cards only on purchases above a certain amount, such as twice the card’s value.
If the store stops accepting your card
If the business stops honoring gift cards, the unused balance usually becomes a claim against the business in the bankruptcy case. Gift card holders are generally unsecured creditors, which means they are paid, if at all, only after higher-priority debts. In many retail bankruptcies, unsecured creditors receive a small fraction of what they are owed, or nothing.
The Bankruptcy Code gives a limited priority to consumers who paid deposits for goods or services they never received, currently up to $3,800 per person. Whether a gift card counts as that kind of deposit has been disputed. In the 2016 City Sports case, the U.S. Bankruptcy Court for the District of Delaware ruled that gift card balances did not qualify, because buying a gift card is a completed purchase rather than a deposit. Other cases have been resolved differently. In RadioShack’s bankruptcy, for example, a court-approved settlement in 2015 gave priority treatment to certain gift card holders. The outcome depends on the case.
WHAT TO KEEP FOR A GIFT CARD CLAIM
- The physical card, or the email with the e-gift card number
- The purchase receipt or order confirmation, if you have it
- A screenshot of the balance, with the date
- Any notice from the business about gift cards, including cutoff dates
- A record of any attempt to use the card that was refused
Bank-issued gift cards are different
Federal gift card rules treat store gift cards, which can be used only at one business or group of businesses, separately from general-use prepaid cards, such as Visa, Mastercard, or American Express gift cards that work wherever the network is accepted. A general-use card is issued by a bank or other card issuer, not by the store that sold it. If the store where you bought it goes bankrupt, the card is generally not affected.
A mall or shopping center gift card can work either way, depending on who issued it. Check the back of the card or the cardholder agreement.
What to do now
- Check your balance on the business’s website or receipt, and save a dated screenshot.
- Look for official notices about gift cards on the business’s website, in stores, or on the bankruptcy case website. Large cases usually have a free case website run by a claims agent, listed in the company’s announcements.
- Use the card soon if the business is still accepting it, and note any conditions or cutoff dates.
- Keep your records until the balance is used or the case is closed.
- Watch for a claims deadline. If the business stops honoring cards, the case notices will say whether gift card holders need to file a claim, how, and by what date. Claims are usually filed with a proof of claim form, Official Form 410.
For gift cards, store credit, and unfulfilled orders when a business closes without bankruptcy, see our guide on when businesses close. If you paid for something you never received, our explainer on customer refunds when a business closes covers card disputes and refund options.
Other things a bankruptcy can affect
Gift cards are often only one part of the picture. A bankruptcy can also affect store credit, layaway, prepaid orders, loyalty points, and warranties or service plans sold by the business. The same rule applies to each: check the official notices, keep your records, and watch for claim deadlines.
Frequently asked questions
Can a store refuse my gift card after filing for bankruptcy?
Yes, if the court has not approved honoring gift cards, or once an approved cutoff date has passed. Many reorganizing businesses do get permission to keep accepting them, sometimes with conditions.
Will I get my money back if I file a claim?
Possibly, but often not in full. Gift card holders are usually unsecured creditors, and unsecured creditors in retail bankruptcies frequently receive only a small percentage of their claims, or nothing.
Does my gift card expire because of the bankruptcy?
Federal rules generally prevent a store gift card’s funds from expiring sooner than five years after it was issued or last loaded. Those rules apply to cards while they are being honored. A bankruptcy court’s orders can still set a cutoff date for using cards in the case.
What if the business is sold?
A buyer is not automatically required to honor the old gift cards. Some buyers agree to honor them to keep customers. Check the sale announcement and the business’s website.
Can I sue the store instead?
Once a business files for bankruptcy, an automatic stay generally stops lawsuits to collect debts from it, including small claims cases. Your claim usually goes through the bankruptcy case instead. If a business simply closed without filing for bankruptcy, small claims court against a business that closed may be an option.
Sources
- 11 U.S.C. § 507, priorities
- Federal Register, Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases (2025)
- In re City Sports, Inc., U.S. Bankruptcy Court for the District of Delaware (2016)
- In re RS Legacy Corp. (RadioShack), U.S. Bankruptcy Court for the District of Delaware, opinion of March 17, 2016
- U.S. Courts, Chapter 11 Bankruptcy Basics
- U.S. Courts, Proof of Claim (Official Form 410)
- 12 C.F.R. § 1005.20, Regulation E (gift cards)
- Federal Reserve Bank of Boston, “Gift Cards and Bankruptcy” (2009)
More coverage is in our Business & Bankruptcy section. This article is general information, not legal advice. See our Legal Disclaimer. Spot an error? Read our Corrections Policy.
