The company had sales of $2.8bn in 2007.
US retailer Linens 'n Things has filed for bankruptcy protection, citing problems in the housing market and the credit squeeze.
Consumers cutting back on discretionary spending hit demand for its furnishings and homewares.
Linens 'n Things had suffered a "precipitous decline" in profitability and liquidity, the company said.
The firm intends to close 120 stores. The rest will trade normally while it reorganises the business.
"The significant deterioration in the mortgage, housing and credit markets and the resulting impact on the retail marketplace, particularly the home sector, has overwhelmed the operating and merchandising improvements that we have made over the past two years," said executive chairman Robert DiNicola.
The home accessories firm has received $700m of additional financing to help it continue operations and buy new merchandise.
Linens 'n Things has 589 stores in the US and Canada. Its Canadian outlets are performing well and are not included in the bankruptcy protection application, the retailer said.