What to Do With Your Gift Card When a Store Goes Bankrupt

Your gift card might be in Chapter 11.

Last Christmas, a Sharper Image (SHRPQ.PK Quote) gift card could buy a home breathalyzer machine, a digital photo-displaying key chain or a trip to a zero-gravity chamber in Nevada.

Two months later, the same gift card couldn't be used for anything -- except maybe a bookmark. That is because Sharper Image filed for bankruptcy Feb. 19 and immediately stopped accepting its own gift cards. The gizmo retailer's woes are evidence of a growing hazard for consumers: gift cards that become worthless when a company goes broke.

Bankruptcies at big national chains like furniture sellers Levitz Furniture and Bombay & Company left those holding gift certificates in the lurch last fall. ...