Once-promising wireless startup Lightsquared filed for bankruptcy protection late Monday afternoon after billionaire investor Philip Falcone and his partners failed to reach a debt default agreement with creditors, who pushed to remove Falcone from his leadership position in the company as part of the deal.

The Chapter 11 protection will provide the company with some "breathing room" as it attempts to resolve the regulatory issues that have haunted its long-awaited wholesale network, in which Lightsquared has invested more than $3 billion over the last few years.

"The filing was necessary to preserve the value of our business and to ensure continued operations," said Marc Montagner, interim co-chief operating officer and CFO at LightSquared. "All of our efforts are focused on concluding this process in an efficient and successful manner."

The decision to file for bankruptcy protection came just hours before the expiration of a second one-week extension from creditors, who are owed in excess of $1 billion. Falcone and the creditors were working toward a proposal that will allow Lightsquared to avoid filing for Chapter 11 protection, but the talks reportedly soured when creditors insisted that Falcone hand over control of the company.

The filing caps off a painful five-month stretch for LightSquared, which saw its plans of competing in the thriving wholesale wireless market dashed when the FCC refused to approve its long-awaited network, saying its interferes with GPS receivers and flight control systems. The startup was given several deadlines to fix its network – and tried a number remedies, including using a lower spectrum band from satellite firm, Inmarsat – but has still been unable to garner approval from the FCC.

LightSquared has since been forced to stop work on its network, default on payments to creditors and cut nearly half its staff. Former partners Sprint and Leap Wireless compounded the damage by walking away from their network-sharing agreement with LightSquared. Falcone took over control of the startup after CEO Sanjiv Ahuja abruptly resigned in February.

In a statement, LightSquared expressed hope that it can resolve the regulatory issues but did not offer any specific plans as to how it will proceed. Falcone said last month that he was open to swapping LightSquared's band of spectrum for a comparable one controlled by the Department of Defense, according to Bloomberg.

Boeing Satellite Systems Inc. and Alcatel-Lucent were listed in the filing as LightSquared's two largest creditors.