By Rivka Inger, Senior Features Editor
When Toys “R” Us officially filed for bankruptcy in 2017, I’m sure that many of us had the same thought: “Well, there goes my childhood.” After that, I definitely started seeing a change around my neighborhood – the enormous Toys “R” Us having been replaced with an Ocean State Job Lot, for example. At the same time, I still saw commercials advertising toys from what I thought was the now defunct children’s brand. Puzzled, I decided to explore deeper.
To my initial surprise, Toys “R” Us is still around. Aside from having a fully functioning online store that ships nationwide, the brand has active social media pages, advertising campaigns, and even a few in-person stores at partner locations such as Macy’s on Broadway and American Dream. Upon learning this, I began to question what going bankrupt actually means from a simplistic standpoint.
Essentially, the term bankruptcy doesn’t necessarily mean that a company has shut down, though that may sometimes be the case. Bankruptcy actually comes in several forms, the most common of them being Chapter 7. Companies that file under Chapter 7 are acknowledging an inability to pay back unsecured debts – a fancy term for low-risk loans – and are given permission to liquidate some or all of their properties to pay them back. However, in some cases, the company may not pay back any debt at all.
The next most common form of bankruptcy is Chapter 11, a popular choice for companies that would like to remain in business but require their debts to be forgiven. This is the chapter under which Toys “R” Us filed, demonstrating their intention to stay in business all along. Sadly, filing under Chapter 11 is not a guaranteed way of saving a company. For example, this was the chapter that Blockbuster filed under, a company that now only has one remaining store in the entire world.
Though these are the primary forms of bankruptcy, other more specialized versions exist to fit a company’s particular needs. Chapter 13, for example, is for companies that are more financially well-off but need resources to regroup their debt repayment plan. Chapter 9 specializes in assisting larger areas such as towns, cities, and school districts. Chapter 12 specializes in family farms and fisheries and Chapter 15 was established less than twenty years ago and specializes in companies with credits and debts across different countries.
What struck me most about this short research spree was that not once, on any website, did a particular form of bankruptcy directly reference a company’s guaranteed closure. In fact, a bankruptcy filing is far less dramatic than that, and often only means that a company must regroup its finances to pay off outstanding debts, which may involve selling properties or shuttering stores. In Toys “R” Us’ case, most of its stores were indeed closed, as the retailer had an increasingly difficult time turning a profit in the face of competitors like Amazon. Luckily for our childhood selves, Toys “R” Us was able to save itself from closing down permanently through its Macy’s partnership in 2021, albeit giving up some of its distinct identity to ultimately stay in business.