Are your air miles at risk if you fall on hard times?

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.

See related: Credit card video: The basics of debt settlement, How debt settlement works, how it affects credit scores, Do you lose your miles if you cancel your rewards card?