United Press International said yesterday it will file for bankruptcy protection, but will continue distributing the news while it attempts to reorganize its finances.

Although the company's management told employes it planned to make a filing under Chapter 11 of federal bankruptcy law, it did not say when or where the filing would occur, and by late in the day it had not gone to court. Chapter 11 of the bankruptcy law shelters a debt-burdened company from its creditors while it tries to get back on its feet.

The 78-year-old company, which supplies news reports to newspapers and broadcast stations around the country from news bureaus around the world, is reported to be at least $17 million in debt to creditors, including American Telephone & Telegraph Co., American Express Co., RCA Corp. and UPI's principal lender, Foothill Capital Corp., which is said to be owed $7 million.

"UPI's basic news, picture and feature report will not be interrupted during this period of financial reorganization," UPI Editor in Chief Maxwell McCrohon said. "All the financial alternatives open to us mean that our employes will be paid, and that the news service will continue to deliver its full report to all subscribers."

The bankruptcy decision capped a series of financial crises at the company and came just seven days after UPI Chairman Luis G. Nogales had told the wire service's staff that creditors had agreed to a 90-day moratorium on past debt.

The bankruptcy move apparently was spurred by Foothill Capital's refusal to advance UPI the money for the paychecks issued this week to the news service's 2,000 employes. UPI staffers were told Thursday night not to cash the checks.

Foothill officials could not be reached for comment on why they had decided to withhold the salary money from UPI, but the wire service reported in its own story on its problems that management sources said Foothill "was dissatisfied with the Wire Service Guild's refusal to renegotiate a new labor contract and make new wage concessions."

The Guild, which represents about half of UPI's employes, already has made major concessions during the past few months of financial uncertainty at the news agency.

The Guild asked its members "to continue working, as scheduled, while it analyzes the situation, gathers additional information and decides on available options."

The decision to file for reorganization was voted unanimously yesterday afternoon by the wire service's four-member board of directors, which includes Nogales and a Wire Service Guild representative, after urging from the company's major creditors and lawyers.

Just last week, Nogales had written employes that UPI was facing "in all likelihood, our last major push," and expressed confidence that the company's financial problems could be worked out over the next few months. "We're in a 15-round fight in which there will be no early knockouts," he said.

Under Chapter 11 protection, UPI will be able to continue operating and paying its employes, but will be able to suspend payments to its creditors temporarily until a financial reorganization plan can be worked out. Although such reorganizations vary widely, they usually involve either paying back creditors a fraction of the amounts owed, or giving them stock or other securities in the company in lieu of payment.

UPI has long been the nation's second-largest wire service, behind it arch-rival, the Associated Press. But in recent years its position has been further eroded by competition from "supplemental" services such as the New York Times News Service and the Los Angeles Times/Washington Post News Service. In an attempt to keep up, UPI has had to make large investments in technology to deliver the news faster to its print and broadcast subscribers.

The company has been struggling financially for more than two decades: Its last profitable year was in 1963. But it has become particularly shaky in recent months as debts have mounted despite a number of drastic actions to reduce the company's operating costs, including layoffs and a 25 percent cut in employes' salaries last fall.

UPI reported a profit for the final three months of last year, and reportedly has turned a profit in other months since -- an apparent indication that it could make money if it could get out from under its load of debt.

But the huge debt caused major cash-flow problems, and even the reported profits proved illusory: The company said last week that it failed to pay $1.8 million in federal payroll tax in 1984's fourth quarter, even as it was reporting a $1.1 million profit.

As the financial problems have mounted, so have disputes within the wire service's leadership. Nashville businessmen Douglas Ruhe and William Geissler, who bought the company in 1982 from E. W. Scripps Co., were forced by lenders earlier this year to virtually give up control of the company to a group led by Nogales.

The management shift followed a bizarre upheaval that first saw Ruhe and Geissler fire Nogales and then hire him back a day later when it became clear that UPI's lenders wanted to do business only with him. Under the new management arrangement, Nogales was allowed to run the company and seek a refinancing that would include a buyout of Ruhe and Geissler's holdings.

Ruhe and Geissler then came into conflict with Nogales and the rest of the new management team a few weeks ago when they apparently attempted to find buyers for their stock without asking permission from Nogales and UPI's other leaders, who argued that the two owners could not sell without their permission. Ruhe and Geissler later withdrew their sale attempts.

UPI officials, and some outside analysts, have contended that the company might be able to make a profitable go of it if its debt is reduced or it receives a fresh infusion of capital from a new owner, either of which the Chapter 11 filing could bring.