What happens to gift cards for bankrupt companies?

Bankrupt retailer gift card warning

(WWBT/WXIX) - You probably got a few gift cards over the holidays and they’re great for getting what you want. But what do you do if that retailer goes bankrupt?

When a company declares bankruptcy, everyone owed money by that retailer lines up. At the front of the line arethe “secured creditors,” like banks and landlords.

Way at the back of that lin are the little guys, like gift card holders.

When Toys R Us declared bankruptcy last year, the court gave immediate approval to a plan to honor Toys R Us gift cards.

Holders of gift cards to The Limited, however, weren’t so lucky.

When that chain closed its stores, its gift cards immediately became worthless.

When Radio Shack, Wet Seal and HH Gregg declared bankruptcy in recent years, their gift cards were honored for just a short time after the filing.

If you got gift cards to individual retailers this holiday season, use them as fast as you can. You can also sell them or trade them right away on a reputable gift card site like Cardpool or Raise.

If you use your plastic to buy a gift card, and that retailer goes bankrupt before the card is used, call your credit card company. Some will work with you on a charge back. This is why many people choose those prepaid cards, from Visa, MasterCard and others, instead. Just make sure that you know about any activation or monthly fees.

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