TOKYO (Reuters) - Toshiba Corp 6502.T, responding to media reports, said on Friday it was not aware that its U.S. nuclear unit Westinghouse was considering filing for Chapter 11 protection from creditors - an option analysts say could jeopardize the entire group.

Reporters raise their hands for a question during a news conference by Toshiba Corp CEO Satoshi Tsunakawa and other senior sompany officials at the company's headquarters in Tokyo, Japan February 14, 2017. REUTERS/Toru Hanai

The Nikkei business daily reported Toshiba was now looking at a potential Chapter 11 filing as one of several options for Pittsburgh-based Westinghouse, as it grapples with cost overruns at two U.S. projects that are set to result in a $6.3 billion writedown.

In theory, such a drastic step could help draw a line under problems in its nuclear business.

But analysts and sources with knowledge of the matter say that even under a Chapter 11 filing, Toshiba could still be on the hook for up to $7 billion in potential liabilities as it has guaranteed Westinghouse’s contractual commitments - an arrangement typical for the nuclear industry.

One source familiar with the matter told Reuters there had been discussions within Toshiba on the issue, but there was also a lot of resistance. The source could not be identified because he was not authorized to speak to the media.

A spokesman for the TVs-to-construction conglomerate said he was unsure how any U.S. bankruptcy filing would affect its Westinghouse contractual commitments .

The ill-fated purchase of nuclear construction plant firm CB&I Stone & Webster in late 2015 has plunged Toshiba into crisis, forcing it offer up a majority stake in its prized memory chips business for sale.

It has been forced to recognize huge cost overruns at two projects to build the first nuclear reactors in the United States in 30 years, stemming from design changes such as reinforcing the plants to withstand aircraft crashes.

Analyst Hideki Yasuda at Ace Research Institute said Toshiba would likely wait before making any bankruptcy filing, first filling its balance sheet hole and rebuilding cash reserves.

“Chapter 11 is the best way for Toshiba to clear up all potential liabilities and losses over Westinghouse. But right now it’s not an option,” said Yasuda.

Industry specialists say Toshiba could also sell all or part of its stake in Westinghouse, but a buyer would not necessarily take over all Westinghouse’s liabilities, as Westinghouse did when it bought CB&I Stone & Webster.

For example, in the planned takeover of French nuclear group Areva's AREVA.PA reactor unit by utility EDF EDF.PA, Areva's liabilities related to the troubled Olkiluoto 3 contract are not being taken over by EDF.

“Toshiba will have to clean up its financial situation first,” a second source familiar with the situation said.

The company said on Friday it is looking to sell most of the flash memory unit with a final decision before the end of March next year.

It plans to raise at least 1 trillion yen from the sale, enough to cover the Westinghouse writedown and create a buffer for any fresh financial problems, sources told Reuters earlier.