As a follow-up to our story a few weeks ago about floundering rental chain Movie Gallery, new reports suggest that bankruptcy is “imminent” for the company, and could come as early as next week. Reuters is reporting that Movie Gallery has has hired the law firm of Sonnenschein Nath & Rosenthal to prepare for a possible “prearranged” bankruptcy filing.

According to Home Media Magazine, this type of bankruptcy, which would be Movie Gallery’s second since 2007, would allow the firm’s creditors “to approve fiscal restructuring without a more laborious determination by a bankruptcy court judge”. The company would also close as many as 1,800 underperforming locations.

Michael Pachter, an analyst with Wedbush Morgan Securities, feels that the company was doomed to obsolescence by complacently failing to develop kiosk, by-mail or digital channels. Said Pachter:

“This is not a surprise, as most rental customers are going to Redbox, some are going to Netflix and others are doing nothing,”

Our old friend, Merriman Curhan Ford analyst Eric Wold, said that Movie Gallery’s store closures will produce $200 million in rental revenue to be fought over by Redbox, Netflix and Blockbuster. Said Wold:

“Obviously, when a location closes, those customers that previously frequented that location are not going to stop renting DVDs completely — they will have to find a new source of DVD rentals,”

Was there anything Movie Gallery could have done to stanch the bleeding, Insiders? Is there any hope for them yet after another restructuring? Leave your opinion in the comments.

[via Reuters and Home Media Magazine]