There is currently a lot of uncertainty in the travel industry, as hotels chains & airlines push for government bailouts one of the things their respective lobbying groups and media teams push is the prospect of filing for bankruptcy. This has lead some readers to begin to worry about what happens to their points & miles in the event of a bankruptcy.
The short answer is that it really depends on the type of bankruptcy we’re talking about. For example in 2005 Delta filed for chapter 11 bankruptcy and after 19 months of restructuring they exited that bankruptcy. Before they entered bankruptcy co-branded credit card partner American Express provided delta with $600 million in cash and financing. In this case Delta frequent flyer members kept their miles and Delta was able to show that this program was a positive asset. American Airlines also filed for chapter 11 bankruptcy in 2011 and members kept their miles as well. A counter point is Midway Airlines when it filed for chapter 7 bankruptcy in 1991, all 700,000 members lost their miles.
It’s hard to know what will happen this time with so much uncertainty at the moment. I think we will see some airlines enter chapter 11 bankruptcy but in those cases I think points & miles are relatively safe as the loyalty programs as a whole are extremely profitable. The other thing to keep in mind is that loyalty programs can basically make changes at any stage so while the COVID-19 situation is extremely scary it’s not unique in the threat to miles/points.
Here’s what happens to gift cards and points if a company goes Chapter 7: https://wompwompwomp.com/
Hey
William Charles or 
Chuck
times are tough for some, travel/hotel stays gonna be down for a while and
also an uncertainty about devaluations of points…
Any chance you could make a post about best ways to get cash for points/miles?
As right now its just some dead capital that prob can be better used for people who need cash in these difficult months.
For example:
I have like a million Chase UR points.
Even having the CSR cc, I don’t need them for travel/hotel since what little I do actually need for that I continously get from other sign-up bonusses (e.g. I still haven’t used up my 2017 BoA Merrill+ flight points).
I know UR’s are generally worth 1cpp, but any better ways to convert them into cash?
Is re-selling to a broker a safe option maybe and how does it work? Anything else?
Might really be a good topic for an overview post. TIA 🙂
$10,000 cash sounds pretty good when the 1.5cpp travel options are no longer… available. I think you’re crazy to keep so many points in the bank if losing them would be painful to you
I agree with you. Just kept collecting over time (mainly with my two Ink cards), but now might be a good time to cash in (I also will cancel my CSR once the AF hits).
But hoping to find a secure way to get more than 1cpp.
Also, this was just my one example (and thankfully Im not hurting too much for immediate cash). There was another one in this thread about someone cashing out hotel points at 0,2cpp, and so on…
Just thought an overview might be a good topic in general especially now with the shutdown
(and hopefully find me my >1cpp option 😉 )
Don’t think there is a better way unfortunately
Sad. But thanks for your response.
And like I said, mine was just an example.
Some people might need to cash points/miles out to pay bills and maybe DoC can show them the best way… 🙂
Dont all their policies basically say they can remove/devalue any time they want and points have no real value? They are only backed by the whims of the company and their reputation.
I imagine points through the credit card companies that havent been redeemed at all are safe?
Yeah I think citi, BOA, Well Fargo, US bank, chase, amex, etc… fall in the too big to fail category
Sort of. But independent of the current financial situation, credit card points programs can sometimes be discontinued, as in the current case of US Bank’s FlexPerks (which was decision US Bank made before Covid-19 appeared). You can still do something with the points, but what exactly may change and how long you have to use up your points you have to pay attention to.
So as long as your credit card points are with a major bank, they are likely to be safe as long as you’re paying attention to any news about them.
Question on the opposite end –
What happens to an individual’s points/miles if they end up having to file for Chapter 7?
A friend of mine was self employed for 10+ years, they had a good business and they’ve been put out due to COVID-19. They don’t qualify for unemployment because they were self employed and right now a lot of expenses are adding up. So my friend is strongly considering bankruptcy as an option.
That’s very unfortunate to hear. It’s these sort of stories that I always emphasize everyone to have a year’s worth of emergency funds so that they have enough time to get back on their feet.
He has a wife and two kids, he said his business has been declining since February when the virus was announced more in the US. He had $15,000 saved but his rent was $2,450, then car payment, utilities, phone, insurance (medical & auto), living expenses for 4 people, plus credit card payments. Some are saying things won’t improve until June, and even then his business likely won’t pick up right away or be back to how it was until maybe September.
I’m just wondering if it came fo that would he be able to keep those points he’s spent years accruing?
so sorry
I don’t have a definite answer, and the post addresses it as a big maybe depending on the carrier’s goodwill to their frequent flyers. My thought is based on the fact that during a restructuring, the debt holders are preferred from Employees, Suppliers, Bondholders, Preferred Shareholders, Common Shareholders. My guess is that since frequent flyer miles are a form of unsecured debt, that they would be somewhere between bondholders and preferred shareholders, which is not a good thing since by then, bondholders would already have taken an haircut on their amount owed.
I was actually asking about if my friend filed bankruptcy, and not the restructuring bankruptcy the total wipe out bankruptcy.
If he did that would he still retain his points? (Sorry if that wasn’t clear).
First, why does he have credit card payments and miles? If you’re playing this game, you should be paying them all off otherwise you are losing money to get miles.
As far as losing points in bankruptcy, I doubt it since they can’t be liquidated to pay off debts, which is the point of bankruptcy.
He’s not an MS’er he did sign up for a few cards for the bonuses which he transferred the points to travel partners. Then he continued using those cards for personal/business expenses racking up points.
Thanks for the answer he’s just considering it at this point, but it may be a reality. He read some mixed answers online and had asked me I didn’t have an exact answer so I thought I’d ask.
In a Chapter 7 it would really come down to the type of points we are talking about. If they are Hotel or Airline points then they are probably safe because they have no direct cash value. Transferable Points like Chase Ultimate Rewards, or Membership Rewards, etc, or straight cash-back points like Wells Fargo or Barclay Arrival+ points do have a cash value that can be applied to debtors that take credit cards, so they are probably gone. Note that transferring the points out of transferable currency to a non-cash back currency after he is publicly considering bankruptcy could be considered fraudulent conveyance. While Bankruptcy is defined by Federal Law it is influenced by State Law so rules can vary so he should seek professional counsel before doing anything.
My two cents: those rewards are not his. They can’t be taken through a divorce, judgement lien, or from any other third party that I know of. You play this game by the rules of the airlines and the banks, etc. It’s their currency and those rewards aren’t yours until you cash out. Amex clawbacks are a prime example.
In the terms of some of the credit cards I have, they’ll take away all your accumulated rewards if you file for bankruptcy.
This is not legal advice; but In most cases nothing; Points have no cash value unless they can be sold legally. If he uses them it needs to be 90 days prior to filing or they must be listed in the assets
If a creditor is listed and its their points then the creditor can freeze the points and they will be forfeited ie chase UR points, but points of airlines or hotels won’t be an issue as they wouldn’t likely listed on the petition ie chase Marriott credit card he would list chase not Marriott on the petition and Marriott points have no cash value and cannot be sold legally or used to repay a debt
Any hope that American Airlines will reinstate our forfeited miles? Nowadays banks are so aggressive in taking adverse actions and there is no consumer protection essentially. American Airlines achieves a new low by forfeiting miles earned from credit cards citing they are not earned the way as they want. WTF.
Doubt it
How do we cash them in when we cannot travel?
Just dont f*ck w Alaska and I can keep my cool lol
Trying to cash out half of my Hilton points thru Amazon (something I would never normally do). I keep getting an error trying to link my account though. Anyone else experience this.
How would you even do this, what can you do with hilton points, I have over 180K.
You can use them at 0.2 cpp, so your 180k is worth $360 at amazon.
I would guess that most of the airlines that survive will leave points intact. If they cancel them, way too many customers will just leave and go elsewhere. The airline has way more at stake than any of us.