When bankruptcy freezes an airline credit card, what happens to the miles?
Cathleen McCarthy is a journalist whose articles on travel, commerce and consumer topics have appeared in dozens of publications. She writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com
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Dear Cashing In,
have recently filed for bankruptcy. The first thing I noticed is that I can no
longer use my credit cards even though I pay my debts off every month. When I
asked customer service people at Chase about my flier miles, I was told that I cannot
use them since the bankruptcy went into effect. My lawyer said contact the
company that handles flier miles for Chase UnitedPlus Awards. I cannot find
anything to help me until I came to this site. I hope you can help me retrieve
my miles. Thank you. -- Glenn
you have a Chase United MileagePlus Explorer card, the company that handles most
of the frequent flier miles you earned with the card is United Airlines, not
Chase. With Explorer, or any credit card co-branded with a partner airline or
hotel chain, the issuer only controls the reward points or miles until you're
paid up for that billing period. At that point, rewards are deposited into your
account with the partner's loyalty program -- in this case, United MileagePlus.
Maybe the customer service rep at Chase was referring to miles you earned in the
final month that you used the card.
the points were not already transferred from Chase to United, Chase may be able
to freeze them under the default provisions of the credit card agreement, as it
did with use of the credit card," says bankruptcy attorney Ted Connolly. "However, once they are moved to United, the debtor should still be able to use
them in the future without interference from the bankruptcy trustee."
to be sure, I checked with Chase directly. "If a card is shut off, any miles
earned prior to that are sent to and stored with the travel partner," a Chase representative confirmed. "Anyone that has questions about miles earned should
contact the travel partner's program for additional information."
does have cards that earn points through the bank's own rewards program,
Ultimate Rewards. Perhaps the Chase rep you spoke with was confusing your
frequent flier miles with those reward points. If you earned Ultimate Rewards points
with a Chase Sapphire card, for example, your rewards could be frozen along with
access to your credit card.
you have to declare bankruptcy and have a lot of rewards stashed away, it's
better to have earned your points or miles with a co-branded credit card. Even
if your credit card account is frozen, your points or miles are safely stashed
with the partner company's loyalty program.
frequent flier programs expressly state that miles or points are not property
of the member, and are not transferable by operation of law to any person or
entity," Connolly says. "This means there's a good argument that the miles
are not even part of a debtor's bankruptcy estate.
even if they are considered an asset of a debtor that could be administered by
a bankruptcy trustee to pay creditor claims, they very rarely, if ever, are. Bankruptcy
trustees rarely inquire about airline miles. Even if a bankruptcy trustee
learned about the miles, the miles usually have restrictions on transfers that
would render them valueless in a sale by the bankruptcy trustee."
United Airlines has a reason to freeze your account, you should be able to
access those miles. Regardless, the company to contact about them is United,
not Chase. You can start by logging into your MileagePlus account and checking your
status and miles balance there.
See related: How to pick a bankruptcy attorney,
Chapter 13 bankruptcy: How it works, When can an issuer close your credit card account?
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Published: June 11, 2013
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