Gilat Satellite Networks (Nasdaq: GILTF) joint Internet venture with EchoStar and Microsoft, StarBand, has filed for bankruptcy protection in a Delaware court, seeking protection from creditors on its $229.5 million in debt. StarBand owes its biggest creditor, Bank Leumi, $68 million.

The company received another $2.8 million loan to maintain activity and now has assets Valued at $58.1 million. The company received a "going concern" warning from its accountants in February.

"We've been a very unattractive investment vehicle," said David Trachtenberg, president and chief marketing officer of StarBand. "We filed in order to continue operating the company," which has about $33.9 million in annual sales. Trachtenberg said the company will continue to pay salaries and provide customer support.

Trachtenberg told Bloomberg that EchoStar is StarBand's collection agent and has withheld more than $2 million it collected from StarBand's customers. Last week, StarBand filed a federal lawsuit in Alexandria, Virginia, against EchoStar, which owns 34% of the company's stock. Trachtenberg said StarBand dropped the suit today so the dispute can be decided by a bankruptcy judge.

* StarBand files suit against EchoStar