Bankruptcies are always painful, especially for the rank and file who work for the company that made the filing. Blockbuster Inc., which filed for bankruptcy last September (See The Deal Pipeline story, subscription required), has issued a warning to Texas regulators that it could layoff close to 865, depending on the outcome of the sale of the bankrupt entertainment rental company.

Blockbuster is expected to close 145 stores this year as part of its Chapter 11 filing. Layoffs will likely occur in the company's Dallas headquarters, where it currently employs 238. The layoff notice filing with the Texas Workforce Commission indicates that a mass layoff could happen at Blockbuster on or after April 20.

The company's steady decline was precipitated by its inability to adjust to intense competition from Netflix Inc. as well as on-demand video from cable and satellite companies. Now, Blockbuster is considering an initial bid of about $290 million from a group of senior lenders called Cobalt Video Holdco LLC.