For many people, credit cards have benefits. They are convenient to use, accepted in a wide variety of stores in the U.S., and some people use them to earn points or other credit card rewards, which can be significant.
If the credit card is not paid in full each month, however, it can accrue interest. The interest, combined with the minimum balance owed, may be more than the credit card user can afford.
Over time, this can cause significant financial difficulty for the credit card user and he or she may pursue bankruptcy for a new financial start. The credit card user may want to know what happens to the credit card rewards if he or she files for bankruptcy.
Credit card rewards
When a credit card holder files for bankruptcy, he or she must list all of their debts and assets. It is not always clear whether travel miles and rewards points themselves are considered assets, because their value can vary. However, if the points were used to purchase gift cards or other goods, those are assets that should be listed on the bankruptcy petition.
Also, when a credit card user files for bankruptcy, generally his or her credit cards are closed. Many credit card companies have policies that will suspend or cancel the reward points if the user has not made payments, so it is possible the card holder will lose the points.
With hotel or airline rewards, the credit card user may be able to transfer them to the hotel or airline’s loyalty program.
The outcome of the bankruptcy is dependent on the individual’s circumstance. An experienced attorney can provide representation and advice.