WATERLOO, Iowa (AP) _ Rath Packing Co., which employed 7,000 people before filing for protection under bankruptcy laws more than a year ago, has cut its workforce to less than 80 and will sell one plant to raise money to pay off creditors, the company president said Wednesday.

The company plans a public auction Jan. 15 to sell its Columbus Junction plant, said Rath president Lyle E. Taylor. He said the property has been advertised nationally.

The new operation as envisioned under the reorganization plan would employ approximately 500 people at its remaining plant in Waterloo, Taylor said.

But it would work with only processed meat products shipped in from elsewhere, not using its local slaughterhouse, and will market its products in the Midwest, South and Southwest.

About 100 Rath employees were laid off Friday from the Waterloo plant when it shut down its production operations pending reorganization under Chapter 11 of federal bankruptcy laws. In its prime, Rath employed 7,000 workers.

The Waterloo plant employs 34 workers primarily to maintain the facility, as well as 45 administrative personnel. All production at the plant halted Friday.

The company has succeeded in reducing the secured debt it owes its primary financial backer, Security Pacific, from more than $17 million to approximately $2.8 million, Taylor said.

Rath filed for federal bankruptcy protection in November 1983. The temporary shutdown of the plant will give the company time to complete the reorganization plan which will be presented in U.S. Bankruptcy Court in Cedar Rapids Feb. 1, he said.

He said creditors of the company's $24 million in unsecured debts would have to ''set aside their grudges and decide if they really want Rath to continue in Waterloo.''