The bankrupt Movie Gallery video rental chain will begin shutting down operations in two weeks.  The chain's Movie Gallery and Hollywood Video stores will remain open for the first two weeks in May followed by a two-day closing period and then liquidation. The once flourishing movie rental business has been eroded over the past decade by the rise of Netflix’s rental-by-mail business, by $1 rentals at kiosks, and by the growing use of the Internet for rental downloads.

Movie Gallery filed for Chapter 11 bankruptcy in February, the second time since 2007 that the beleaguered chain had been forced to seek protection from creditors (see “Movie Gallery Heads to Chapter 11”).  But in spite of the closing of some 760 stores in February and securing a court agreement to close 391 more stores in March, Home Media Magazine is reporting that prospects for the troubled video rental chain are so poor that it will not attempt to emerge from Chapter 11.

When Movie Gallery filed for Chapter 11 on February 3rd, it had liabilities in excess of $540 million.  At that time the chain had 2,600 locations operating as Movie Gallery and Hollywood Video stores, and employed some 19,000 full and part-time workers, who will now be forced to find other employment in a very tough economy.