May 28 (Reuters) - Dewey & Leboeuf LLP, the ailing law firm that has been on the verge of closure, said it has filed for chapter 11 bankruptcy protection in a U.S. court and is seeking approval to liquidate its business after it failed to find a buyer.

Once one of the largest law firms in the United States, Dewey has lost more than two-thirds of its roughly 300 partners to other firms amid concerns about compensation and a heavy debt load.

Dewey had warned employees earlier this month of mass layoffs and of the possibility the firm may shut down, and a person familiar with the matter had told Reuters that the firm was considering a bankruptcy filing.

Dewey said it had decided to wind down its business following unsuccessful negotiations with other law firms to strike a deal. It said it would ask about 90 employees to remain on staff to assist in the liquidation, which it expects to be completed in the next few months.

Negative economic conditions, along with the firm's partnership compensation arrangements, created a situation where its cash flow was insufficient to cover capital expenses and full compensation expectations, Dewey said in a court filing.

"During the first quarter of 2012, the firm was confronted with liquidity constraints that led to the precipitous resignation of over 160 of the firm's 300 partners by May 11," Dewey said.

The New-York based firm listed liabilities in the range of $100 million to $500 million, according to the filing.

As of the petition date, Dewey's assets consist of about $13 million in cash, accounts receivable of about $255 million, various pieces of artwork, and about $11 million invested in an insurance consortium, among other potential claims.

In the interim, Dewey said the firm will be operating on a budget and according to a timetable to be determined by the court. The firm has petitioned the court for permission to continue to pay salaries, benefits and paid time-off for current employees.

PENSION PLANS

Dewey said that the 401(k) plans and qualified pension plans of its current and former employees and partners are held in trust and cannot be accessed by the firm's creditors.

The U.S. Pension Benefit Guaranty Corporation filed suit this month to take control of three of the firm's pension plans, which the agency said were underfunded by $80 million.

Dewey has retained Joff Mitchell of Zolfo Cooper LLC as Chief Restructuring Officer and Albert Togut of Togut Segal & Segal LLP as bankruptcy counsel.

The London and Paris offices of the firm are operated through a separately incorporated UK entity, which was placed into administration on Monday.

Administration is a UK legal process under court supervision, broadly similar to chapter 11. The UK partnership is following broadly the same approach as that of Dewey in the United States, the firm said.

The firm had two dozen offices worldwide, including in Washington, Los Angeles and London. Some of the firm's biggest clients included General Motors Corp, eBay, Novartis, Ambac and Berskshire Hathaway Reinsurance Division.

Dewey is one of a handful of major law firms to declare bankruptcy since the recession that began in 2007. They include Coudert Brothers, Heller Ehrman and Howrey.

The case is Dewey & LeBoeuf LLP, Case No. 12-12321, U.S. Bankruptcy Court, Southern District of New York (Manhattan).