A Baltimore bankruptcy judge said yesterday that furniture seller Scan International, which filed for Chapter 11 protection this week, could pay employees the money they're owed and indicated that he soon would approve the company's borrowing plan so it could fill hundreds of outstanding customer orders.

During yesterday's proceedings, Judge James F. Schneider also set a hearing for next week to approve Rockville-based Scan's going-out-of-business, liquidation-sale plans.

The company, which has two retail locations in Virginia and three in Maryland, expects to begin selling off its merchandise early next month to raise funds. The sale will likely extend into March. Scan's Maryland stores are in Rockville, Columbia and Lutherville.

In filings Wednesday with the U.S. Bankruptcy Court for the District of Maryland, the 47-year-old company said its sales had dropped along with its ability to borrow money, which has led to less inventory and further-reduced revenue "creating an ever-deepening cycle of decline." Representatives determined the best way to "maximize value" for its hundreds of creditors was to file for Chapter 11 protection.

The company's lender, Wells Fargo Business Credit, is willing to extend Scan about $1.7 million if the judge approves it at a mid-January hearing. But the company owes at least that much to its 20 biggest creditors before factoring in other bills.

And hundreds of customers have paid deposits for furniture they haven't yet received - furniture that Scan hasn't yet bought.

Scan attorney Steven F. Fruin said orders would be filled to the extent the company can buy inventory. If they can't be filled, it will be up to the bankruptcy court to determine what happens to the deposits.

The liquidation sales at Scan's five retail locations should help defray costs, Fruin said.

tricia.bishop@baltsun.com