Treat gift cards as a use-or-lose proposition

When a retailer drapes the going-out-of-business sign, what happens to your gift cards?

Well, the answer would depend on the retailer.

Wet Seal, which sells trendy clothes to teens and young women, filed for Chapter 11 reorganization in early 2015. The chain has since been bought and the new store owner is honoring outstanding gift cards, which is great news for consumers but something that rarely happens.

By contrast, RadioShack has received bankruptcy court approval to sell its brand for $26.2 million to hedge fund Standard General. And while stores remain open, don't try walking in and using a RadioShack gift card.

"The name may be worth a great deal of money, but right now the gift card is not," said Shelley Hunter, who is known as the Gift Card Girlfriend and has a blog at GiftCards.com.

Hunter has created a Chapter 11 Gift Card Watch List. The list can help consumers figure out what's happening to their gift cards as retailers undergo restructuring.

It's wise to take time to review what gift cards you have and spend them before a store hits the financial skids.

It's bad enough, of course, that consumers often tuck gift cards into sock drawers or cabinets and never redeem them or they somehow just flat-out lose them. But this year's shake up in the retail landscape has proved once again that it is necessary to adopt a use-it-or-lose-it policy with some gift cards.

If you can no longer use a gift card at a retail chain in Chapter 11, you might have a long-shot option.

In some cases, a consumer can file a claim with the bankruptcy court regarding unused gift cards if they're within a given deadline. Some consumers could want to do that with their gift cards from RadioShack, women's retailer Cache and others.

Steven Wybo, senior managing director for Conway MacKenzie, a Birmingham, Mich.-based turnaround and restructuring management company, said how much a shopper would receive in bankruptcy for a gift card would depend on the amount of proceeds available to the unsecured creditors.

In some cases, experts say, it could be pennies on the dollar or not even that.