Many credit card companies will offer incentives to new customers.
These usually come in the form of reward programs, with points that can be redeemed for products and services, and even yearly cash rebates.
Then there are those travel cards issued by travel companies that come with air miles, and store cards that gather points for savings in store.
But what happens to your rewards if you file for bankruptcy?
Can you keep them or will they be included with your assets?
Let’s take a closer look.
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Are Credit Card Rewards An Asset In Bankruptcy?
When you file for bankruptcy, you do have to declare your assets.
Unfortunately, these can include your credit card rewards.
If they have value and can be converted into cash when you file for bankruptcy, then they should be disclosed to your trustee.
On the one hand, this is bad news as you will lose the rewards you have accumulated.
On the other hand, it can be good news, because if you have accumulated a large number of points, you might be able to replace another asset with these points during the bankruptcy process.
Turning Over Your Credit Cards
When you file for bankruptcy (or a proposal), you will be required to turn over your credit cards to your trustee.
During this time the issuing company will cancel your credit cards.
This means you will lose any points you have accumulated.
The issuer will use ‘the right to set-off’ to cancel your rewards, and this allows them to apply a positive balance in one account (eg. your rewards account) against an account with a negative balance (such as your credit card debt).
If you have a credit card with no balance, you might be able to keep it.
However, the issuer might still find out about your bankruptcy, and they might cancel it anyway, so you shouldn’t assume cards that are clean of debt will be safe.
Other Cards
While you might have to lose your credit cards, it might be that you will be able to keep your air mile and store cards, as there is no ‘right of offset’ with these cards.
The reward programmes offered by these issuers often have no significant monetary value, so while they are technically an asset of your estate, your trustee is unlikely to take them from you, unless the value of them was actually substantial.
This means that you should still have access to the points that have been accumulated on them.
Your Best Course Of Action
Before you file for bankruptcy or a consumer proposal, use any points you have accumulated on your credit or other points cards if you don’t want them to be used as an asset.
While not every card will be used to offset your debts, it’s better to avoid the risk if you want to make use of your points.
Get in touch with us to find out more, especially if you are struggling with debt and need professional help.
Call us at (877) 879-4770 or fill out our form to arrange a free consultation with a trustee in your area.
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