Bethany Biron/Business Insider
Forever 21 filed for bankruptcy on Sunday.
- Forever 21 filed for Chapter 11 bankruptcy protection on Sunday.
- As part of the filing, the company said it would close up to 350 stores globally. It could close as many as 178 underperforming stores in the US, though it will have sales and rent negotiations through December 31.
- With the possibility of so many stores closing, those with gift cards from Forever 21 should spend them as soon as possible, said Jay Klauminzer, the CEO of the leading online gift card marketplace Raise.
- About 17.7 million gift cards were left outstanding when Borders liquidated its stores in September 2011, which led customers to file an unsuccessful lawsuit to recoup their losses - worth an estimated $210.5 million.
- "In the U.S., our stores are open and business is continuing as usual, customers will not see any changes in stores, gift cards will continue to be accepted, our policies, including returns and exchanges, remain the same, and customers can still purchase online," a representative from Forever 21 told Business Insider.
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Forever 21 is facing an uncertain future, and for gift card holders, now is the best time to act.
The fast-fashion retailer filed for bankruptcy on Sunday and plans to close up to 350 stores globally. It could close as many as 178 underperforming stores in the US, though it will have sales and rent negotiations through December 31.
"In the U.S., our stores are open and business is continuing as usual," a representative from Forever 21 told Business Insider. "Customers will not see any changes in stores, gift cards will continue to be accepted, our policies, including returns and exchanges, remain the same, and customers can still purchase online."
Read more: How Forever 21 went from a fast-fashion powerhouse to bankruptcy and a troublesome future
Though Forever 21 is still operating stores and its online business, an expert says that those who are holding gift cards from the company should redeem them as soon as possible.
"Your best bet is to spend your gift cards right away while there are still remaining stores and an online presence," said Jay Klauminzer, CEO of Raise, a leading mobile payments and prepaid gift card platform. "Otherwise, if there is value left after the company physically closes, you become an unsecured creditor."
When Borders liquidated its stores in September 2011, about 17.7 million gift cards worth an estimated $210.5 million were left outstanding. Customers filed a lawsuit to redeem the value of the cards, but a judge ruled that the gift cards were worthless.
Read more: 10 brands that peaked in the '90s, including Blockbuster and Limited Too
Toys R Us gift cards also expired in April 2018 as the company prepared to close all its US stores.
Though Forever 21 did not announce a plan to close all of its stores, Klauminzer says that now is the time to act to avoid getting stuck with a worthless gift card in the event of a complete liquidation.
"In the repayment waterfall, your place in line is behind any secured credit holders, such as debt holders or loan providers," Klauminzer said. "As a result, you would receive a very minimal payback (only pennies on the dollar-if even that much!). By using it right away, the full value is guaranteed."
A spokesperson for Forever 21 said that the company's dicussions about US store closures are still ongoing.
"We do, however, expect a significant number of these stores will remain open and operate as usual, and we do not expect to exit any major markets in the U.S. Forever 21 has had and expects to continue productive discussions with landlords," the spokesperson said.
If you're a Forever 21 employee with a story to share, email sciment@businessinsider.com.