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Toys R Us gift cards could be useless in a matter of weeks

Business Insider logo Business Insider 3/14/2018 Hayley Peterson

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Bankruptcy experts are encouraging shoppers to immediately use their Toys R Us gift cards amid reports that the toy company is preparing to potentially close all of its US stores.

An announcement on the fate of the retailer and its nearly 800 stores could come as soon as Thursday, when Toys R Us is set to appear at a bankruptcy hearing.

It's not looking good for the embattled toy chain.

"To say the vultures are circling is probably an understatement," said Larry Perkins, the CEO and founder of the advisory firm SierraConstellation Partners. In the case of a liquidation, he said, "it's highly unlikely that there will be any meaningful piece of the business that remains." 

Toys R Us did not respond to a request for comment.

Shoppers often fail to recoup the money left on unused gift cards during retail bankruptcies.

When Borders began liquidating its stores in July 2011, about 17.7 million gift cards were left outstanding. Several customers filed a lawsuit to recoup their losses, but a judge ruled that the gift cards — worth an estimated $210.5 million — would not be refunded.

Oftentimes, retailers that are liquidating will publicly announce a deadline by which shoppers must use their gift cards. 

Toys R Us filed for bankruptcy in September and recently started clearance sales at about 170 stores that it plans to permanently close in April.

The company missed a payment to some of its vendors this week and is in the process of drafting a liquidation plan, CNBC reports

In the case of a liquidation, going-out-of-business sales at Toys R Us stores could begin within a matter of weeks, according to Corali Lopez-Castro, a bankruptcy lawyer and managing partner at Kozyak Tropin and Throckmorton.

"Toys R Us is not going to want to drag this out," Lopez-Castro told Business Insider.

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