Circuit City Stores Inc, the Number 2 U.S. consumer electronics retailer after Best Buy, filed for bankruptcy on Monday. This is an effort to cut costs and turn around its deteriorating financial condition.

This is a decision that comes about a week after Circuit City said it would close 155 stores as it deals with a worsening economic downturn that has left more consumers with less money to shop. Nevertheless the company announced that it intends to keep its remaining stores open through the bankruptcy proceedings.

It’s the vendors who were making pressures regarding their withholding products during the holiday period. Circuit City also said it cut 700 more jobs at its headquarters.

Circuit City filed for Chapter 11 protection, which will allow it to hold off creditors and continue operations while it develops a reorganization plan. Its Canadian operations also filed for similar protection. The move "should provide us with the opportunity to strengthen our balance sheet, create a more efficient expense structure and ultimately position the company to compete more effectively," James A. Marcum, vice chairman and acting president and chief executive, said in a statement.

But for anyone who wants to take advantage, Circuit City spokesman Jim Babb said it is "safe to assume" that consumers can expect deep discounts on TVs and other products in those Circuit City stores that are being liquidated. The retailer, which operates 712 domestic superstores and nine outlet stores and 770 stores in Canada, "plans to continue operating the business without interruption," the company also said in a statement.

Among its requests to the court, the company has demanded to continue with wages to employees and retail programs, such as "returns, exchanges and gift cards." In addition, Circuit City has negotiated a $1.1 billion debtor-in-possession credit facility to cover its near-term operating costs. In other words Circuit City will never technically own the items that it stocks and sells using this credit, but has complete control over their management.

In the latest quarter, which ended in September, the company reported a loss of $1.45 a share, nearly four times the loss it experienced a year before. The company's stock price has been dropping and dropping since June, which it started at around $5 a share. By the end of October, the New York Stock Exchange had notified the company it was in danger of being delisted because its stock price remained stuck below $1.

But the situation is darker than it looks actually. For instance, according to court documents, the company owes Hewlett-Packard Co. more than $118 million. HP ranks ahead of Samsung Electronics, to which Circuit City owes nearly $116 million and Sony, which is owed $60 million.

The retail outfit, which competes with the likes of Best Buy and Wal-Mart in the U.S., admitted that their previous measures weren’t enough to save the firm from filing for bankruptcy. It blamed the “difficult economic climate” and vendors who refused to offer their support because they were wary of the company’s “deteriorating liquidity position”.