The firm has filed a notice to appoint administrators, a move that will give it breathing space from its creditors while it works out a rescue plan.
The company has 127 stores and about 1,500 employees.
The second lockdown in November came at a crucial period for the firm, which makes a high proportion of sales then.
Just under half its sales, 40%, come from trade in 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.”
The company went through an insolvency process, known as a Company Voluntary Arrangement or CVA, almost two years ago to cut costs.
The chain now has 10 working days to find a solution.
Paperchase said its strong online trading had not made it “immune” from the impact of shop closures 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,” it added.
“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.
High Street pressure
The chain is the latest of a string of high-profile retailers to hit trouble in the past year.
The sector was already battling with the shift to online sales, coupled with rising costs, including rents and higher minimum wages.
Coronavirus restrictions which shut non-essential shops piled on the pressure.
Others that have run into trouble recently include Debenhams, which last month said it would cease trading putting 12,000 jobs at risk. Arcadia Group, which owns Topshop and Dorothy Perkins, has also gone into administration, putting a further 13,000 jobs at risk.
Meanwhile, Edinburgh Woollen Mills’ brands Peacocks and Jaeger also fell into administration in November, putting 21,000 jobs at risk.
And earlier last year, Oasis and Warehouse fell into administration in mid-April after failing to find buyers, and online fashion group Boohoo said in June it was buying the brands but closing all stores.