The firm revealed this morning that it intends to file a petition under Chapter 11 of the US Bankruptcy Code.
Lehman last week reported a $3.9bn loss for Q3 and that it was selling $4bn in mortgage assets to BlackRock Finance in an attempt to de-risk the business.
UK banking group Barclays and Bank of America had also been both in the frame to buy the beleaguered investment bank, but talks with both firms are said to have collapsed.
The board of directors of Lehman authorized the filing of the Chapter 11 petition in order to protect its assets and maximize value.
In conjunction with the filing, Lehman intends to file a variety of first day motions that will allow it to continue to manage operations in the ordinary course.
Those motions include requests to make wage and salary payments and continue other benefits to its employees.
None of the broker-dealer subsidiaries or other subsidiaries of Lehman will be included in the Chapter 11 filing and all of the broker-dealers will continue to operate.
It says that customers of Lehman Brothers, including customers of its subsidiary Neuberger Berman Holdings, also may continue to trade or take other actions with respect to their accounts.