What to do when a store going under refuses to take your gift cards

KAYSVILLE — For many folks, gift cards are the go-to gift. They’re generally welcome for most any occasion, plus they hold onto their value. Well, so thought a Kaysville woman until the now bankrupt crafts retailer Joann refused to honor her gift cards.

“I really love scrapbooking,” said Janet Avery.

To fuel that love, Avery often turned to Joann where she buys supplies and loads up on gift cards.

“I know I had at least $75,” she said of the total spread across her four gift cards. “I’m thinking probably closer to $100.”

But now, Joann refuses to accept her cards.

“The guy looked at me and said, ‘Oh, we don’t take gift cards anymore,’” she said a cashier told her. “And I said, ‘No, you can’t do that. These are already paid for.’”

Can bankrupt retailers refuse gift cards?

Joann filed for Chapter 11 bankruptcy in January, and in February, the chain announced it will shutter all locations. But not all are closed yet, so can they refuse gift cards?

In a word, yes, said Shelley Hunter, consumer guide for the gift card website, eGifter.

“When a store goes into bankruptcy, it’s up to the courts to decide if they can accept gift cards at all,” said Hunter.

In Chapter 11 bankruptcy, a retailer’s merchandise gets turned over to liquidator. That liquidator sells it off to generate cash and pay back those who are owed money. Secured creditors get the priority – such as banks and other lenders. Gift card holders are tagged as unsecured creditors, so they’ll get paid last – if at all.

“Gift cards are a liability,” said Hunter. “We think of them as cash but they’re just really a promise for future goods and services. So, once a company no longer owns those goods and services, they can’t redeem the gift card.”

Tough pill to swallow

It’s been a tough pill to swallow for a lot of consumers to several retailers recently.

Just last week, Forever 21 put the kibosh on gift cards. The same thing happened with Big Lots this year. Bed Bath and Beyond stopped taking gift cards in its 2023 bankruptcy.

Related: Get Gephardt: Utah woman ‘frustrated’ with offer made by new owner of Bed Bath & Beyond brand for her now worthless gift cards

And when we took Avery’s issue to Joann, a rep told us that “as part of the closing/liquation process, the Court issued an order stating that Joann was to stop accepting gift cards, coupons, returns, price matching, or discounts after Feb. 28, 2025.”

What can you do with your gift cards?

Still, Hunter said gift card holders should file a claim with the bankruptcy court.

“It’s no guarantee that you’re going to get your money back but it’s better to go on record saying, ‘I have a gift card, and this is how much it’s worth’ than not to try at all,” she said.

If you bought the gift card with your credit card recently, you might try disputing the charge. Or you can hold onto it and see if the retailer emerges from bankruptcy and will take it.

“Sometimes a store or the bankruptcy courts will come back and say, ‘Well, we’re going to extend that deadline based on consumer outcry,’” Hunter said.

The best thing you can do, said Hunter, is when you get a gift card spend it fast.

“The longer you hold onto a gift card, the higher probability that you’ll just lose it, forget it, or that something can happen,” she said.

Bankrate estimates Americans are holding onto $27 billion worth in unused gift cards. And they found one-in-three of us have lost money due to gift cards that have expired, been lost or came from retailers that went out-of-business.

“Go out and use those gift cards,” Hunter advised.

Advice that’s too late for Janet Avery.

“I guess that was my mistake … was holding on to it longer,” she said.