After being plagued by slumping sales and scandal, American Apparel announced on Monday that it has filed for Chapter 11 bankruptcy.

The major retailer, which is known for manufacturing clothes in America, filed for bankruptcy protection Monday morning after suffering from huge debts and a huge dip in sales, reports The New York Times. Meanwhile, the store's founder, Dov Charney, has been engaged in an ongoing legal battle with an employee for allegedly displaying inappropriate behavior in the workplace.

The Chapter 11 petition, which was filed in federal bankruptcy court in Delaware, comes after the store stuck a deal with most of its secured lenders that will help it reduce its debt by having bondholders swap their debt for shares in the company. This process is known as a debt-for-equity conversion. The deal also includes extra financing from the participating bondholders so that American Apparel can keep operating in the U.S.

As of now, American Apparel has about 8,500 employees at six factories and 230 stores across the world. However, the company stated in its court filing that it plans to close an unknown amount of unprofitable stores.

From 2009 to 2014, the 26-year-old retailer lost about $300 million, according to its bankruptcy filing. On the other hand, it earned over $600 million in revenue in 2014 as 59 percent of its sales came from stores, 29 percent from wholesale transactions and 12 percent from online.

The business also plans to implement a restructuring plan that "will save thousands of American manufacturing jobs and will preserve a true American apparel manufacturer."

American Apparel's new CEO, Paula Schneider, released a statement Monday in regards to the company plan to rebrand its image through new marketing, products and store design.

"This restructuring will enable American Apparel to become a stronger, more vibrant company," Schneider said. "By improving our financial footing, we will be able to refocus our business efforts on the execution of our turnaround strategy as we look to create new and relevant products, launch new design and merchandising initiatives, invest in new stores, grow our e-commerce business, and create captivating new marketing campaigns that will help drive our business forward."