It filed under Chapter 11 of the bankruptcy code, which will allow it to hold off creditors and continue operations while it develops a financial reorganisation plan.

The Richmond, Virginia-based retailer has been struggling as nervous consumers spend less and credit has become tighter. The announcement came a week after it said it would close 20 per cent of its stores and lay off thousands of workers.

The company said it decided to file because it was facing pressure from vendors who threatened to withhold products during the busy holiday shopping season.

Circuit City said it had secured US$1.1 billion in loans to provide working capital while it is in bankruptcy.

Assets

It had US$3.4 billion in assets and US$2.32 billion in liabilities, as of August 31.

Circuit City Stores Inc. announced a week ago it planned to close 155 of its more than 700 US stores by December 31.

The stores are spread throughout 28 states, including multiple locations in areas like Phoenix and Atlanta. It is laying off about 17 per cent of its domestic work force, which could affect up to 7,300 people.

- AP