The court in east China's Wuxi city, where the company has headquarters, approved an application from Suntech's nine creditor banks for its reorganization under China's bankruptcy laws.
The official China Daily said the announcement came two days after Suntech Power defaulted on a $541 million bond payment.
The banks said the Suntech Power didn't offer a feasible repayment program, China's official Xinhua news agency reported. The banks expect the company to seek a third party for strategic reorganization.
Suntech was founded in 2001 by Shi Zhengrong, a noted solar power scientist, who took the company public after three years. The company was listed in New York in 2005 as Suntech Power Holdings Co., Ltd., Xinhua said.
Since then, however, the company has been facing oversupply of solar cells and panels in the global market. China also has been involved in trade disputes with the United States and Europe over alleged dumping and government subsidies to its solar panel industry.
The latest development has raised concerns within China's solar industry, China Daily reported.