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Edited by on April 27 2012 at 7:42 AM

Betsey Johnson has filed for Chapter 11 and will close the majority of her 63 boutiques, putting hundreds of employees out of a job. Johnson, however, will remain creative director of her namesake label and will still hold a fashion show this September.

Betsey Johnson Files for Bankruptcy, 350 Employees Expected to Lose Jobs

An auction to buy the company is scheduled for May 8. The store closings will begin shortly afterwards meaning — bright side! — clearance sales, which are planned through the end of July. So you can pick up all the tutus and hot pink prom dresses your heart desires.

Execs at Steve Madden, which assumed $48.8 million of the cartwheeling designer’s debt in 2010 in exchange for her brand’s intellectual property, declined to comment on the exact number of employees that would lose their jobs, but an exec at Betsey Johnson estimated that at least 350 people will be affected.

“I feel so sad for my store people and all my pink girls. They live and die for me. But I need to be better. I really need to work well and be more efficient,” Lady Bets Johnson told WWD.

Madden wants to keep four or five Betsey Johnson flagship stores in New York, Los Angeles and other major cities while the Johnson brand will focus primarily on its moderately priced label sold at Macy’s and other retailers.  The Bestey Johnson label retails from around $128 to $148 as opposed to the Bestey Johnson Collection, available at her freestanding stores, with a price point around $395. Around 75% of the spring line will be moderately-priced goods.

“I love the moderate-price range. It is in sync with all the girls who are buying my clothes,” Johnson said.

According to Madden, e-commerce will be unaffected – “It will seamlessly integrate into our infrastructure.” — and they’re working to put a new license in place for Johnson’s sportswear to avoid “interruption to wholesale deliveries.”

The Betsey Johnson bankruptcy filing may come as a surprise, but for the designer, the fashion landscape has become all too crowded. When asked what was her biggest challenge in conducting business she responded, “The competition — the H&Ms, Topshop, Century 21 and the knockoff ability is unbelievable. Within three days of something being on the Internet, they have seen it, they copy it and they price-beat it.”

But don’t expect the plucky 69-year-old to stay down for long. She’s got a new reality show with her daughter Lulu, a new fragrance launching in the fall and a positive outlook: “You know, as you get older, you really want to go back to that idea of happy — happy, productive.” [WWD, sub req'd]

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Story by Lester Brathwaite

I was center square from 1969 to 1978, during which I perfected the art of the zing as well as a crippling cocaine addiction. Bea Arthur was responsible for both. @LesFabian lester at fashionindie.com