Are Gift Cards Still Good When a Retailer Files for Bankruptcy?
Whether your gift card still works after a bankruptcy filing is decided by a court order. Where to find the cutoff date and what to do when cards stop working.
When a retailer files for bankruptcy, its gift cards, store credit and layaway are honored only if the bankruptcy court approves it, often for a limited time. Most retailers ask permission on the first day; in a liquidation, cards often get a cutoff date. The court order and the claims agent’s website state your exact deadline.
Once a company files, money it owed before the filing, including the value loaded on gift cards, becomes a claim in the bankruptcy case. The company needs court permission to pay those claims ahead of other creditors, which is what honoring a gift card does.
Why does a bankrupt store need a judge’s permission to accept gift cards?
A gift card is an unpaid debt of the company to the cardholder. Bankruptcy freezes collection of debts that existed on the filing date, and the Bankruptcy Code sets the order in which creditors are paid. Letting customers spend their cards in full would put them ahead of suppliers and lenders, so the company asks the court for authority to do it anyway.
Retailers usually make that request in a “customer programs” motion filed with the petition, one of several first-day motions. The argument is practical: refusing gift cards drives away the customers the company needs while it reorganizes or sells inventory. Judges often grant these motions, sometimes with conditions.
How long will a bankrupt retailer honor gift cards?
There is no standard period. It depends on what the court approves and on the direction of the case.
| Situation | What usually happens to gift cards |
|---|---|
| Chapter 11, company keeps operating | Cards often keep working in the ordinary course under a first-day order |
| Chapter 11 with store-closing sales | Cards honored until a cutoff date the court approves, often weeks after filing |
| Business sold to a buyer | Depends on whether the buyer agrees to take on the gift card liability in the sale |
| Chapter 7 liquidation | Stores close and cards usually stop working; holders become unsecured creditors |
Rite Aid’s second Chapter 11 case is a recent example. The chain filed in May 2025 in the federal bankruptcy court in New Jersey, and the court set a gift card cutoff in early June 2025, according to a consumer alert from the Pennsylvania Attorney General’s office. Returns and exchanges also had their own earlier cutoff. Deadlines that short are common when a retailer is winding down.
Restrictions often come with the cutoff: a store may accept a card only if you spend an equal amount of cash, or may stop accepting returns while still taking cards. Read the notice at the register and on the company’s website, and check it against the court order if the two differ.
Where can you find the official gift card deadline?
The official source is the court order, and the easiest place to read it is the website of the company’s claims agent. Large Chapter 11 debtors hire a claims and noticing agent, such as Kroll, Epiq, Stretto or Omni, which posts every filing in the case for free.
- Find the company’s press release about the filing; it usually names the claims agent and gives a case website and phone line.
- On the case website, look for the first-day order on “customer programs” or a notice about store closings.
- Search the order for “gift card” to see the cutoff date and any conditions.
- If there is no claims agent site, the docket is on PACER, the federal courts’ records system, for a small per-page fee.
What can you do if your gift card is no longer accepted?
You can file a proof of claim in the bankruptcy case for the unused balance, before the deadline the court sets, called the bar date. Your gift card makes you an unsecured creditor, and unsecured creditors in retail bankruptcies often recover little or nothing, but filing is the only way to be counted.
The Bankruptcy Code gives a limited priority to consumer deposits for goods or services that were never delivered: up to $3,800 per person under 11 U.S.C. 507(a)(7), as of the adjustment that took effect April 1, 2025. Whether a gift card balance counts as such a deposit is decided case by case, so the claim form lets you state the basis and the court sorts it out. Our step-by-step guide on how to file a proof of claim covers Official Form 410 and where to send it.
Two other routes exist outside the bankruptcy case. If you paid for the card with a credit card recently, ask the card issuer whether a dispute is possible; card network rules, not bankruptcy law, decide that. And some states’ consumer protection offices publish alerts with the court deadlines, as Pennsylvania did for Rite Aid.
Are loyalty points, store credit and layaway treated the same way?
They are all pre-filing obligations, so they need the same kind of court approval, and each can get a different answer. A first-day order might keep gift cards working while freezing loyalty point redemptions, or end layaway programs and refund deposits. Store credit from a return is usually grouped with gift cards in the order. The US Courts Chapter 11 explainer describes how first-day relief and creditor claims fit into the case, and our comparison of Chapter 11 and Chapter 7 explains why the chapter matters.
Bottom line
When you hear that a chain you shop at is in trouble, use any card balance soon rather than waiting for the filing: before a bankruptcy, the card works under normal terms; afterward, it works only on the court’s terms. If the chain has already filed, the court order posted on the claims agent’s site controls, even where the store’s FAQ page says something else.
FAQ
Can a store refuse my gift card the day it files for bankruptcy?
Yes, until the court rules on its first-day motion. Some retailers stop accepting cards for a few days and then resume once the order is entered, so check the case website before assuming the card is worthless.
Will I get my money back if the card stops working?
Only through a proof of claim, and only to the extent unsecured or priority creditors get paid under the plan or liquidation. In many retail cases that recovery is a small fraction of the balance or nothing.
What happens to gift cards if another company buys the bankrupt chain?
The buyer decides whether to take on the old cards as part of the purchase agreement the court approves. If it does, the cards keep working; if not, they stay a claim against the old company’s estate.
