About a month ago, we wrote about reports that Blockbuster Video would be filing for bankruptcy in mid-September. So it shouldn’t come as a huge surprise that Bloomberg News is reporting that the video chain will be making the filing official on Thursday morning.

According to Bloomberg:

Blockbuster Inc. is set to file for bankruptcy tomorrow in New York before the stock market opens, using a $125 million loan to reorganize so it can compete with rivals such as Netflix Inc. in renting movies online, according to a person with knowledge of the planned petition.

Billionaire investor Carl Icahn, who bought about one-third of Blockbuster’s bonds, will join with a group of creditors in swapping their debt for all of the video-rental company’s stock, according to the person and two others who declined to be identified because the discussions are private…

If creditors get all of Blockbuster’s stock, current shareholders will be wiped out.

The report says that Blockbuster, which quietly swapped CFOs a couple weekends ago will continue to focus on the handful of bricks and mortar stores that still make money, while using the rest of the loan to try to bolster its online streaming and DVDs by mail products.

Regardless, if you have an unused Blockbuster gift card sitting around, use it now. When a company enters into bankruptcy, gift card holders often get left out in the cold, so it’s best to use them while you still can.

Blockbuster Said to Plan Bankruptcy Tomorrow With Loan [Bloomberg]

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.