By Lily Kuo

WASHINGTON (Reuters) - Rural communities across the United States are fighting back against the U.S. Postal Service's plans to close thousands of post offices, bogging down the cash-strapped agency with time-consuming appeals.

The Postal Service has said it needs to downsize drastically or it will be unable to deliver mail by the end of next summer.

It is losing billions of dollars each quarter because its core business of delivering mail has eroded as consumers have turned to email and paying bills online.

While awaiting a congressional overhaul of its business structure, the Postal Service is exploring cost-cutting options of its own, including a review of about 3,700 post offices for possible closure.

But a flood of appeals threatens to slow down that plan.

"We are getting a much heavier number of appeals now," Stephen Sharfman, general counsel for the Postal Regulatory Commission said at a public meeting on Wednesday.

Residents are opposing the shuttering of their local post office for fear it would add to already high unemployment rates, curtail their mail services, or tarnish a long-standing American tradition.

Members of the commission said it had received 967 letters and emails last month from people concerned about the possible closure of their individual post offices or branches.

Since July, the commission has received 90 formal appeals, which trigger a time-consuming process of reviewing how the Postal Service makes its decisions.

The mail carrier must show it considered the impact of a post office closing on the community it serves and whether a closing detracts from its mandate to provide mail service to all communities in the country. The commission decides whether or not to uphold the Postal Service's decision.

Many of the postal centers under review are in rural areas, and some lawmakers have spoken up to protect their post offices in their states.

Last week Senator Max Baucus of Montana issued a statement disputing closure notices in his state on the grounds the Postal Service had not given community members a full week to comment, as is required.

Public resistance complicates efforts by legislators searching for ways to save the troubled mail carrier.

The Postal Service has until November 18 to make a $5.5 billion payment to a retiree healthcare fund originally due at the end of September, which it has said it will not be able to pay.

It also faces the risk of bumping up against $15 billion government borrowing limit.

The Postal Service has called on Congress to provide relief by allowing the agency to end Saturday mail delivery, raise rates and restructure its labor cost obligations.

Ann Fisher, director of the Postal Regulatory Commission's office of public affairs, said she expected lawmakers to agree on a plan for the Postal Service in time to submit it to a congressional panel charged with cutting the U.S. deficit.

The 12-member panel needs to come up with a deficit plan and vote on it by November 23.

On Thursday, members of the House of Representatives Oversight Committee are to debate a bill by Republican Darrell Issa, which is seen as a leading piece of legislation to reform the Postal Service.

(Editing by Chris Wilson)