Bankrupt Toy Chain's Gift Cards Remain Valid At N.Y. Locations

Attorney General Andrew M. Cuomo announced that he has obtained a commitment from KB Toys, a national toy retailer that is in bankruptcy proceedings, to honor New York consumers' gift cards through the holiday season and the post-New Year shopping period.

Under the agreement with the attorney general, KB will honor gift cards purchased by consumers at least through Jan. 11.

As noted, KB Toys is regarded as one of the largest toy retailers in the nation operating primarily out of mall-based stores. The retail chain filed for bankruptcy on Dec. 11.

KB Toys sold as much as $2 million in gift cards this year alone, and currently holds a total of $12 million in unredeemed gift cards. The bankruptcy court authorized, but did not require KB Toys to honor gift cards.

It was noted that the attorney general worked to ensure that New Yorkers who have gift cards purchased from KB Toys will be able to use the cards, as well as any merchandise credit, through the holidays and during the immediate post- holiday period at KB Toys stores.

In addition, consumers who have merchandise on lay-away have until today, Wednesday, Dec. 31 to obtain the merchandise by paying the balance due. KB Toys also committed to notifying the attorney general and to post signs in stores at least 10 days in advance of any decision to stop honoring New Yorkers' gift cards.

"The bankruptcy filings and store closings that have unfortunately decked this holiday season are too often rendering gift cards worthless and taking hard-earned money out of New Yorkers' pockets," said Cuomo. "I urge all New Yorkers with KB gift cards to take advantage of this welcome agreement, and use the gift cards for their holiday shopping needs this season."

This is the second time in four years that the Pittsfield, Mass.- based company has filed for bankruptcy. KB Toys operates 53 stores in the state of New York and seven in New York City. The company is preparing to close all of its 461 stores throughout the nation, including its New York stores, and began going out of business sales on Dec. 19.

It was noted that the gift cards will be honored at those store sales, but not online. Consumers have a chance of receiving full or partial reimbursement for any unused funds remaining on their KB Toys gift cards by filing a priority proof of claim in KB Toys' bankruptcy proceeding.

More information on this process is available on the attorney general's website, www.oag.state.ny.us, which also has a report documenting the risks associated with gift cards that describes many of the hidden traps consumers face when attempting to use their gift cards.

Consumers wishing to read these valuable tips should visit www.oag.state.ny.us/features/gift_ card/pdf/report.pdf.