The chain has filed a notice to appoint administrators to salvage the company.
Paperchase has around 1,500 employees and 127 stores across the UK, including a flagship outlet in Edinburgh’s George Street, and several others in Scotland.
Bosses blamed the November lockdown for the collapse in sales, claiming forced store closures put “unbearable strain” on its business.
Despite strong trading over the summer, around 40 per cent of Paperchase’s yearly trading usually occurs between November and December.
Paperchase said: "The cumulative effects of lockdown one, lockdown two - at the start of the Christmas shopping period - and now the current restrictions have put unbearable strain on retail businesses across the country."
"Out of lockdown we've traded well, but as the country faces further restrictions for some months to come, we have to find a sustainable future for Paperchase.
"We are working hard to find that solution and this [notice of administration] is a necessary part of this work. This is not the situation we wanted to be in.”
In November, Edinburgh Woollen Mills' brands Peacocks and Jaeger also collapsed in November, putting 21,000 jobs at risk.
Other retailers that have fallen into financial turmoil during lockdown include Debenhams, where more than 12,000 jobs are at risk after it ceased trading in December.
The Arcadia Group, which owns high street brands including Topshop and Dorothy Perkins, also went into administration last year, putting 13,000 jobs at risk.