BOSTON -- Employees of the Tweeter Home Entertainment Co. are dealing with an economic jolt. They will not get the severance payments they were promised.

NewsCenter 5's Janet Wu reported that Tweeter CEO Joe McGuire claimed the company had no choice -- once it filed for bankruptcy, severance deals had to be terminated.

Mark Stahlhammer worked at Tweeter for over three years when he was laid off. His store was one of 49 Tweeter stores that shut down. The severance agreement he was promised was just less than $1,500. He said it was cash he needed as a student working his way through college. But a week later, the company filed for bankruptcy, telling him there would be no money after all.

"I feel like they promised us the severance package just to keep us in the stores so that we could do the dirty work and get them closed. And then, throw us to the curb," Stahlhammer said.

"Really, up until a couple of days before the filing, the company was still working very diligently to find alternative sources of financing, alternate sources of lending," McGuire said.

Tweeter, known for selling high-end sound systems backed by reliable service, has been losing money for six years and is $165 million in debt. More than a quarter of its employees have been laid off and one-third of its stores will be shut down by the end of the month. Tens of thousands of creditors are owed money.

McGuire insisted the company was planning to make those severance payments until the last minute.

"We've known for a while the company has been struggling. Everybody in the company has. So the choice is do you make the promise as long as you are communicating that you are in trouble in hopes that you can live up to the obligations? And that is path we tried to follow," McGuire said.

But Stahlhammer said he signed his agreement a week before the bankruptcy was made public.

"It is an apology to all the creditors of Tweeter who have worked with us and have been good partners who may suffer as a result of the bankruptcy process," McGuire said.

McGuire said the 700 employees promised severance can file a claim with the U.S. Bankruptcy Court, but admitted that the wait will be long.

As for Tweeter's future, McGuire said he hopes to have answers by the end of the summer.