Jan. 9 (Bloomberg) -- Circuit City Stores Inc., the bankrupt consumer-electronics retailer, said it’s in talks with two potential bidders and wants to hold an auction to sell its business.

Circuit City said in a statement it may be forced to liquidate if it can’t find a buyer by the end of next week. The retailer asked a judge to approve a Jan. 13 auction, according to court papers filed Jan. 5 and unsealed today in U.S. Bankruptcy Court in Richmond, Virginia, where it is based.

“The company is engaged in significant discussions, meetings and negotiations with two highly motivated and interested parties concerning the terms of a going concern transaction,” according to the statement today, which didn’t identify the potential buyers.

Circuit City sought Chapter 11 protection on Nov. 10 after suppliers concerned about declining sales at almost 1,500 U.S. and Canadian stores cut off credit and demanded cash up-front for shipments. The retailer, which made less money than it expected from selling stores in bankruptcy, is asking for an expedited process to organize the auction, according to court documents.

Under the proposal, bids would be due tomorrow, a deadline that can’t be extended unless the company consults with its bankruptcy lenders, including Bank of America Corp.

The company asked U.S. Bankruptcy Court Judge Kevin Huennekens for permission to hold the auction and a Jan. 16 hearing to approve the results. The Virginia court usually requires companies to wait at least 20 days between the time they seek permission for a hearing and the hearing itself.

Circuit City may be force to liquidate if it can’t sell itself or its assets by that deadline, unless lenders agree to change restrictions in its so-called debtor-in-possession loan of $75 million.

Losing the loan “could strangle” the company’s ability to continue to operate, according to court documents.

The case is In Re Circuit City Stores Inc., 08-35653, U.S. Bankruptcy Court, Eastern District of Virginia (Richmond).

To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net.

Last Updated: January 9, 2009 11:12 EST