As one of the leading sources of debt brought into bankruptcy for discharge, credit card debt can be a heavy burden for anyone experiencing financial hardship. Although credit debt had its perks at one time in the form of bonuses or reward points, these frivolous returns for racking up large balances is hardly rewarding when financial hardship strikes. In the end, these “gifts” from a creditor are likely to do very little when you cannot make your payment.
A Losing Battle
Credit card lenders like to entice debtors with “cash back bonuses”, “reward points” and “frequent flier miles” when balances reach a certain level. The trouble is that these gifts are essentially promises on paper and very few people ever see any tangible money or exchange. When a credit card becomes a part of a bankruptcy case, it is highly likely these gifts will disappear along with the debt.
The reason is that, in bankruptcy, the creditor is ordered to participate in a process to eliminate your debts. When the debt is resolved, either through liquidation or Chapter 13 repayment, the creditor must reflect your account as satisfied. Since the reward points aren’t a form of payment or technically considered an asset, the creditor does maintain the right to reserve any promised gifts that were once based on your balance.