We’ve been hearing from a growing number of readers who still have balances on their KB Toys gift cards and want to know what to do. KB filed for Chapter 11 bankruptcy and liquidated in December 2008, and stopped accepting gift cards on December 31, 2008. Gift card holders have only one option left, and not a very good one.

Back in January, Toys R Us would exchange old KB cards for a 15% discount on any one item, but that program ended on January 31.

Having an outstanding gift card technically makes you a creditor in the KB Toys bankruptcy proceedings, and you can file a proof of claim. You can do that at this Web site. The New York Attorney General’s office has instructions for gift card holders:

When filling out the proof of claim, consumers with gift card balances or merchandise credit should check under Section 5, the fourth box which states: “Up to $2,425* of deposits toward purchase, lease, or rental of property or services for personal, family, or household use – 11 U.S.C. 507(a)(7)”

The deadline for proofs of claim in the KB bankruptcy is May 15, 2009—after that, your gift card is pretty much an iPhone stand.

Actually, using your card as an iPhone stand may be more cost-effective. As Consumer Reports’ Tightwad Tod explained, “The process could take years and you might get back only pennies on the dollar.” Which is still better than zero dollars.

KB Toys, Inc. (2008) [Epiq Bankruptcy Solutions]
Consumer Information About KB Toys [NYS Attorney General]
New Yorkers get gift-card reprieve in KB Toys bankruptcy [Consumer Reports]

(Photo: Dave)

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