Garfinckel's Chapter 11 bankruptcy filing is a dramatic example of the drastic measures a company can take when it is nearly broke.

The retailer is closing at least seven of its nine stores and laying off 200 employees immediately in an effort to allow a portion of the business to survive. Now, it can reorganize its much smaller operations, selling off its inventory while it is protected from its creditors by federal bankruptcy laws.

"They're taking the view Eastern {Air Lines} took: economize, streamline so that the remaining show will continue in the long run," said Roger Whelan, a former D.C. bankruptcy judge who works for the law firm Shaw, Pittman, Potts & Trowbridge.

"It's a very significant bankruptcy case for the District," said Whelan. "I assume their secured creditors were exasperated and wouldn't allow them any more credit."

The retailer's first step was to notify its largest creditors of the bankruptcy move. The creditors, including banks led by First City Bancorporation of Houston, will form a committee to negotiate how much they will be paid.

And Garfinckel's executives will no longer make decisions with the same independence. Their major actions will require approval of the federal bankruptcy court in the District.

Meanwhile, suppliers to Garfinckel's probably will insist on cash payments for delivery of new goods, bankruptcy experts said.

"Now everybody tries to figure out the value of the company and how much the creditors will get," said Joseph Kelly, a bankruptcy attorney at Dow, Lohnes & Albertson in New York. "Unfortunately, the creditors never get what they think they should get." The Dow Lohnes law firm is one of the creditors of Garfinckel's.

As for the customers of Garfinckel's, there will be a short-run advantage. "I expect we'll see some sales and lower prices," said Washington bankruptcy attorney Murray Drabkin.