Gift cards and retailer bankruptcies

Several of our clients have recently contacted us about using gift cards from a retailer who has filed for bankruptcy. This issue has been in the news lately with the Chapter 11 filing by The Sharper Image. They had temporarily suspended redeeming gift cards (they are now accepting redemptions in store or over the phone, but not online). Under California law, if a court has ordered The Sharper Image not to redeem gift certificates, the holder of the card is considered an unsecured creditor and can file a Proof of Claim in the case, but the recovery (if any) will be pennies on the dollar. Shenwick & Associates advises its clients to redeem all gift cards immediately.