Circuit City Files for Bankruptcy

Circuit City Inc. today announced that it has filed for bankruptcy, just one week after the company closed over 150 of its store locations around the country.

According to the release, Circuit City has filed a voluntary petition for reorganization relief under Chapter 11 of the United States Bankruptcy Code. The company says that despite the filing it will continue operating business as management focuses on getting a corporate restructuring plan up and running. The release confirmed that the company’s Canadian operations would also be included in this company-wide bid to reorganize finances and would be seeking protection under the Companies’ Creditors Arrangement Act in Canada.

Last Monday, reports emerged that Circuit City would be closing 155 stores. Affected stores were to be taken over by liquidators as soon as Tuesday, with an evaluation of the value of on-hand stock taking place shortly after. Discounts were expected to be applied to most products available, and a sell-off was then expected to take place by current sales associates. Circuit City credit cards, gift cards, and warranties no longer apply to purchases at stores under liquidation and consumers currently having their equipment serviced by Circuit City were encouraged to get in touch with their local store to verify arrangements of transfer, or to get their product back.

The company said that aside from creating a restructuring plan for improved national distribution channel for its vendors, operating under Chapter 11 will allow Circuit City to pay for stock received from vendors post-filing, which in turn will enable the company to be fully stocked for the upcoming holiday shopping season.

Circuit City went on to say that in an effort to further streamline the business, the company recently cut 700 staff as a part of corporate, regional and district support reductions. This number is in addition to the number of staff cut during store closures. The company estimates that combined, reductions will amount to roughly 20 percent of staff.