Can You Keep Your Airline Miles and Reward Points if You File for Bankruptcy?

When you seek relief for overwhelming debt through Chapter 7 bankruptcy, it’s possible that some assets you own will be taken and sold by the trustee in order to help pay your creditors. Several types of items are fully or partially exempted from liquidation, but you might be unclear on whether you can keep certain nontraditional assets, such as frequent flyer miles and credit card reward points.

Generally, bankruptcy trustees view anything of value as an asset. Therefore, benefits that you’ve accumulated through previous purchases might technically be subject to liquidation. However, several factors might affect whether the trustee will take possession of an asset as part of your bankruptcy proceeding, such as:

• Monetary value — Funds in bank accounts have a specific monetary value, and nonexempt personal property can be sold so that proceeds can be transferred to creditors. On the other hand, miles and points generally have no cash value. This means that the effort a trustee would have to make in order to collect these assets might very likely be fruitless. 
• Transferability —Most reward programs stipulate that points or miles are non-transferable, a limitation that can benefit the debtor. Moreover, a loyalty program’s terms could allow for points to be forfeited upon declaring bankruptcy. Reviewing the terms is crucial to understanding what might occur once a bankruptcy is filed.
• Expiration — Whether it’s their choice or the financial institution’s, someone facing severe debt challenges often have their credit cards closed. In these cases, accumulated reward points typically expire, though there might be a short period of time during which they can be redeemed after the card is canceled. Given that loyalty programs are often a “use it or lose it” proposition, you might consider a redemption, possibly for a balance reduction, before the account is terminated. 

Each individual’s circumstances are unique. A qualified bankruptcy attorney can review the specifics of your rewards and advise as to how they might be addressed during the filing process. If miles or points have substantial value and a trustee seeks to seize them for liquidation, you might be able to retain them under Georgia’s personal property exemption. 

At Jeff Field & Associates, we work personally with each client to help them understand their options and see what life after bankruptcy will be like. For a consultation, please call 404-381-1278 or contact us online. We have locations in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Decatur.