Movie Gallery wins OK to liquidate in bankruptcy

NEW YORK (Reuters) - Movie Gallery Inc, which operated Hollywood Video and was once the second-largest U.S. movie rental chain, won permission from a federal bankruptcy judge to liquidate its operations and shut down.

Judge Douglas Tice approved the company's liquidation plan at a Thursday hearing in Richmond, Virginia, court records show.

Most assets will go to secured creditors, $5 million will go to unsecured creditors, and shareholders will be wiped out, the records show.

Movie Gallery in February filed for Chapter 11 protection for the second time in less than three years, amid competition from rivals such as Google Inc's YouTube, the Netflix Inc mail-order service, and kiosk operators such as Coinstar Inc's Redbox.

The company originally planned to shut one-third of its 2,415 U.S. stores, but decided to liquidate its operations after a loan default. It also operated stores under its own name and Game Crazy.

Larger rival Blockbuster Inc filed for Chapter 11 protection last month in Manhattan.

The case is In re: Movie Gallery Inc, U.S. Bankruptcy Court, Eastern District of Virginia, No. 10-30696.

(Reporting by Jonathan Stempel in New York; editing by Carol Bishopric)