Hilo Hattie has submitted its plan to emerge from bankruptcy in a move that would erase about $14 million in debts owed to dozens of creditors.

The plan, filed late Monday, would commit to fully repay creditors such as landlords and banks, whose debts are secured by assets such as property and equipment leases, and allow the venerable retailer to continue operating its seven stores employing roughly 200 employees.

But unsecured creditors owed about $15 million would receive a cash payment equal to 5 percent of what they are owed, a total of $750,000.

Among creditors with some of the largest unsecured claims are Royal Hawaiian Creations at $793,434; Island Import Co. at $200,291; MV Enterprises at $192,181; Roberts Hawai'i Tours at $173,190; and This Week Publications at $172,047.

Hilo Hattie is asking a U.S. Bankruptcy Court judge to allow eligible creditors to vote on its plan. A hearing has been requested for July 13.

A committee of unsecured creditors in April asked the court to appoint a trustee who would presumably try to sell Hilo Hattie or liquidate the company for the benefit of creditors.

Attorneys representing the committee could not be reached for comment yesterday.

A hearing is scheduled for Monday on the committee's motion.

There is also an unsolicited bid from Maui Divers to buy Hilo Hattie for $1 million and keep it in business with a $2 million infusion. Maui Divers operates jewelry concessions in Hilo Hattie stores, and is owed about $1.3 million secured by its concession agreement. A hearing on the sale is also scheduled for Monday.

Hilo Hattie has previously said the Maui Divers bid is insufficient to pay debts of secured creditors holding store leases, which in bankruptcy typically hold a priority to be paid before unsecured creditors.

The retailer in its Monday filing said unsecured creditors stand to be paid nothing if the company is liquidated, so its reorganization plan presents the best outcome for all creditors.

"The plan pays unsecured creditors 5 percent on their allowed claims, without interest, which is substantially more than they would receive if this Chapter 11 reorganization case were converted to a liquidation case," the company said in its filing.

Hilo Hattie proposes to seek up to $7 million in financing to execute its reorganization plan, which in part is based on opening more stores and closing its flagship store on Nimitz Highway.

The retailer has said the Nimitz store costs too much to run because of the expenses of busing customers to the site.

Hilo Hattie in its filing said it plans to open seven new stores by 2012, including one this year and three next year. The company previously said it has held discussions to lease space at Ala Moana Center, Aloha Tower Marketplace, Queen's Market Place on the Big Island, Kapaa Center on Kaua'i and one or more hotels in Waikiki operated under the Sheraton, Westin and Starwood brands.

Jim Wagner, an attorney representing Hilo Hattie, said financing isn't in place to open more stores, but is being sought by the retailer's owner, an investor group led by Ted Nelson, who through another company owns franchise rights to Fantastic Sams salons in Hawai'i and California.

Earlier, Hilo Hattie pinned its survival on opening a long-planned flagship store at the Royal Hawaiian Center in Waikiki to replace its Nimitz store. But that plan fell apart when the company couldn't finance the estimated $6 million needed to construct the Waikiki store.

Since October, Hilo Hattie has essentially been surviving by paying suppliers and other vendors using savings from not paying rent under rent deferral or abatement agreements. This year through May 2, the retailer has lost $5.4 million.