This should NOT be a surprise to anyone, this was a given fact that this was going to happen eventually, I was calling this bankruptcy in 2007, surprised it even took this long to happen. After this bankruptcy there will be another 6000+ empty store fronts and 25,000 out of work. Still waiting on the bankruptcy filings for Borders and Barnes and nobles sometime in the next 1-2 years. Blockbuster expected to file Chapter 11: source reuters A Blockbuster store in Golden, Colorado, September 16, 2009. REUTERS/Rick Wilking On Wednesday September 22, 2010, 11:06 am EDT By Chelsea Emery NEW YORK (Reuters) - Blockbuster Inc is preparing to file for Chapter 11 bankruptcy within the next few days, a source familiar with the video rental chain's plans said on Wednesday. The Dallas-based retailer has more than $900 million of debt and has struggled to adapt as consumers download movies from their computers rather than go to free-standing rental stores. Blockbuster is working with debtholders to craft a plan in which it would continue operating but shutter hundreds more stores, said the source, who was not authorized to speak publicly about the situation. A bankruptcy filing is expected as early as Wednesday. The details were originally reported in the Wall Street Journal. Under the proposed plan, senior bondholders would convert about $630 million of debt into equity of the restructured company. The other bondholders would be wiped out, according to this source. "We continue to explore all of our options and are making good progress in our recapitalization process," Blockbuster said in an emailed statement on Wednesday. "Our discussions with the studios and bondholders continue to be productive, and we have every reason to believe we will come out of the recapitalization process financially stronger and more competitively positioned for the future." Investor Carl Icahn holds about one-third of the senior debt, the source said. Icahn was not immediately available to comment. Senior bondholders have agreed to provide the company with a loan of about $125 million to help support operations while it is under bankruptcy protection, according to the source. The company said in its statement that it had the support "of a wide range of parties" and that it was working on putting in place "a more appropriate capital structure to support Blockbuster's long-term growth, including investments in our multi-channel platform and new opportunities." As of early this year, Blockbuster had more than 6,500 stores in the United States and internally. The company has introduced a movie download service to move beyond retail locations, but that service's popularity lags behind Netflix Inc's offerings. Shares of Blockbuster were down 17.5 percent at 6.6 cents in morning trading.