Are your air miles at risk if you fall on hard times?
By Randy Petersen
Cashing In
Randy Petersen is editor and publisher of Inside Flyer, which is
considered the leading publication in the world about frequent traveler programs. At CreditCards.com, he writes
Cashing In, a weekly feature in which he answers readers' questions about credit cards rewards programs.
Dear Cashing In,
I was wondering that if I fell on hard times, like many of my friends and relatives, and had to either close down all my Chase credit card accounts,
negotiate a settlement or even go bankrupt, can Chase take away the miles I have that
are already in my United Mileage Plus account? -- John
Dear John,
The answer to your question will
vary depending on which road you go down. Here are the scenarios:
1. If you just want to close your
accounts rather than accept any changes Chase is making to the terms of your credit card program,
then any and all miles that have been credited to your United Mileage Plus
account remain yours. Chase cannot
reclaim those miles just because you have closed your account. It can hold up
any miles deposits based on the current bill that is due, but once that
bill has been settled, then Chase has no claim on the miles that now reside in
your Mileage Plus account. However, if Chase changes the terms of your credit card agreement and you choose to opt out of those changes, any rewards points or miles you have earned will be forfeited unless you redeem them before your account is closed.
2. When negotiating a settlement (paying less than what you owe), the answer depends on what you and Chase agree
to. Unless it is specified in the settlement, then the miles that have already
been credited to your Mileage Plus account will remain there, at least up to
the point before you settled your debt. From what I have observed, Chase, like
American Express, will allow you to stake claim to your miles if the settlement
is "reasonable." Of course, the rub is that you could legitimately
redeem any miles in your Mileage Plus account for travel before entering into
any settlement to provide some safety net.
The problem for Chase from a legal
point of view -- if it was to argue over mileage ownership,-- is determining
which miles are yours and which miles belong to Chase. Your miles are those
based on other travel and partner activity. Chase's miles would be based upon
prior redemption. It would certainly do you well to claim upfront that miles
earned from Chase were redeemed in some manner earlier and that those remaining
are based upon transactions with Mileage Plus. By putting this in writing
before you settle your debt, and having a way to prove acceptance by Chase, you
mitigate any ability Chase has to lay claim later on.
3. Your ace in the hole in the case of bankruptcy is that you do not have to declare any
of your frequent flier miles in these proceedings as items of value because the terms of
conditions you subscribed to as a member of the Mileage Plus program state the following: "Accrued mileage and certificates do not
constitute property of the member." Since it states that "your"
miles do not constitute your property, they would not be put at risk in the
case of a general bankruptcy. Now, that could and would change if you had so
many miles that Chase might challenge the
ownership and include in a motion to the court. I haven't seen that happen...
yet.
This argument actually has history in a long-ago case questioning who
owns the miles of a business traveler. A company tried to lay claim to the
miles of one of its employees, and the court rebuffed that idea because the
company could not prove which of the "mixed" miles in the employee's
account was the company's versus those that had previously been redeemed before
the challenge by the company and change in its travel policy.
I hope this helps. While these
answers provide a general rule of thumb, remember that situations can change.
The Wall Street Journal refers to Randy as "... the
most influential frequent flyer in America," while The New York Times tagged him "the world's leading expert on
airline frequent flier programs." Randy is editor and publisher of Inside Flyer magazine -- considered the leading publication in the world about frequent traveler programs. He is a regular speaker at
business travel seminars and conferences around the world; and is often called upon by the industry itself for
his comments and suggestions about the future of frequent traveler programs.
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