The future of Canada's Music World is in jeopardy after the market's largest domestically-owned music retailer filed for bankruptcy protection.

Music World had previously been owned by the Pindoff family, which founded it in 1960 and sold it to a group of investors last week. According to reports, the Music World chain was put into bankruptcy protection last Friday as part of that deal, which means creditors of companies are not allowed to take any action to collect money owed to them.

Creditors cannot seize Music World's property or petition it into bankruptcy while the new owners attempt to negotiate the company's debt.

The chain until recently operated 72 stores, a drop from its peak when it counted more than 100.

Court documents indicated Music World owes its parent business, Pindoff Record Sales Ltd., more than $30 million ($31.7 million), reports claim.

Pindoff also owns a CD and DVD wholesaling division, as well as 60% of a music distribution business in Quebec. Neither business is affected.

According to court documents, Music World's losses were rising. The chain is reported to have lost C$9.2 million ($9.53 million) in 2006, up from a loss of C$3.2 million ($3.31 million) in 2005.

Last year it had revenue of C$80.6 million ($83.51 million), down from C$96.1 ($99.57 million) in 2005.

Canada's major music labels were keeping mum on the matter yesterday. One label head, speaking on the condition of anonymity, said he expects half of the Music World stores to remain open. The stores in suburban malls that compete directly with HMV, Canada's largest music retailer, will likely close.

Al Mair, the former head of Attic Records and now an industry consultant to several independent labels, said the failure of Music World was another blow to the Canadian music industry.

"This is very negative," Mair said. "Music World was one of the few places where people could actually order music. This is a sad day for the Canadian independent sector for sure. They were already getting squeezed and they'll now get squeezed further."

Depending on their distribution deal, Mair said, some labels might not receive any payment as Music World restructures its debt.

Music sales in Canada have declined steadily since 1999. The Canadian Recording Industry Association reported compact disc sales in 2006 fell to C$719 million ($745 million), a 45% decrease from 1999 when music sales totaled C$1.3 billion ($1.34 billion) in Canada.