Polaroid, the company that created the instant camera just after the Second World War, yesterday filed for bankruptcy protection for the second time in less than a decade.

The company, which now makes digital cameras, printers and photo frames, said that it had filed for Chapter 11 bankruptcy protection after admitting that a continuing fraud investigation into its parent had damaged its own credibility. Polaroid sought to reassure customers and shareholders that the bankruptcy protection filing would not affect workers or its supplier arrangements.

Polaroid, which was bought by Petters Group Worldwide in 2005, said: “The founder of Petters is under investigation for alleged acts of fraud that have compromised the financial condition of Polaroid and other entities owned by Petters Group. Polaroid and its leadership team are not subjects of the investigation involving Petters Group.

“Polaroid has entered bankruptcy with ample cash reserves sufficient to finance the company's reorganisation under Chapter 11.”

Polaroid's move comes after the arrest of Tom Petters, the founder of Petters Group. He was arrested in September on allegations of a $3 billion (£2 billion) fraud.

Chapter 11 bankruptcy protection is an American legal device that shields a distressed company from its creditors while it seeks to cut costs and devise a business plan that will direct it towards recovery.

Polaroid, which is based in Massachusetts, was forced to abandon the production of instant cameras by digital photography. Now, alongside digital cameras, it makes sunglasses that use technology patented by Edwin Land, the company's founder.

Although Polaroid became famous for the instant camera, which was even used by Andy Warhol, Mr Land secured more than 500 patents for inventions using polarised material, including the development of military night vision equipment. Polarisation is a process by which light is filtered so that it moves only vertically and horizontally, rather than oscillating.

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