When Arizona residents think of declaring bankruptcy, they may be familiar with the standard bankruptcy exemptions, such as the car and the residential house, but unaware of the more mundane things they can keep. One of the things they may think of is their credit card points-can they keep them after spending months or even years racking them up.
The best idea would be to cash them out or use them before declaring personal bankruptcy, whether Chapter 13 or 7. Experts disagree about whether points can be considered assets and should be declared or not, since they have no actual value. Trustees also don't inquire about points, since they are generally non-transferrable and there is no point in taking them.
Once someone has declared bankruptcy, if their credit card is in default they will generally not be allowed to use those points. If a balance is owed on the card even though the debtor has kept up with payments, the card is considered in default and points cannot be kept.
If however the card is co-branded with an airline credit card, the points may still be availed and should probably be transferred to the airline or hotel loyalty program, depending on the program they have.
Understanding what is considered an asset and what is an exemption in terms of bankruptcy is not always easy and since accuracy is of the utmost importance when a bankruptcy petition is filed, it may be prudent for Arizona residents to consult an experienced attorney for clarifications. They can guide them through the legal complexities of the bankruptcy petition.
Source: Nerd Wallet, "If I charge off my credit card debt in bankruptcy, will I lose my rewards?" AnishaSekar, Dec. 22, 2014
