Eastman Kodak, the company that invented the hand-held camera, has filed for bankruptcy protection.
The move gives the company time to reorganise itself without facing its creditors, and Kodak said that it would mean business as normal for customers.
The company has recently moved away from cameras to focus on making printers, to try to stem its losses.
The 133-year-old firm has struggled to keep up with competitors who were quicker to adapt to the digital era.
"Kodak made all its money from selling film, then the digital camera came along and now no-one's buying film. It's not like they didn't see it coming. Kodak hesitated because they didn't want to eviscerate their business," said Rupert Goodwins, editor of technology website ZDNet.
Announcing the move to seek bankruptcy protection, Antonio Perez, Kodak's chairman and chief executive, said: "The board of directors and the entire senior management team unanimously believe that this is a necessary step and the right thing to do for the future of Kodak."
The company said it had already arranged a $950m (£615m) credit facility from Citigroup to keep it going.
The bankruptcy protection move by Kodak affects its operations and companies in the US, but the company said its non-US subsidiaries were not included in the move and would continue to operate as usual.
Its shares were suspended following the announcement. They last traded at 36 cents per share.
Kodak's shares have been in decline over the past decade. It fell out of the Dow Jones Industrial Average of 30 top US companies in 2004. That year, its shares were around $30 each.
Since becoming chief executive, Mr Perez has been responsible for steering Kodak away from its traditional market in cameras to focus on home and commercial printers and he reiterated the hope that its "breakthrough" printing technologies would give it a competitive advantage as it tries to get back on track.
The firm said earlier this year that it was pinning its hopes on its printer, software and packaging businesses, with the aim of expanding them to account for 25% of its income by 2013. But some analysts remain to be convinced.
"Even though film and developing is a dead business, there is still money to be made in ink and other supplies," technology commentator Larry Magib told BBC World.
"But Hewlett Packard, Canon and Epson have those markets. Kodak does have printers, but it has not been able to succeed in making money from them," he said.
The move to seek bankruptcy protection comes after Kodak failed to sell its catalogue of digital imaging patents last year. At the time, Kodak warned that it would run out of cash if it did not find a buyer by the end of 2011.
It has struggled as mobile phone manufacturers have introduced increasingly sophisticated cameras on their own devices. This has had a huge impact on the lower end of the digital camera market, which Kodak concentrated on.
Kodak is also hoping to make the most of its technology patents involving digital capture, which is used in mobile phones and other portable gadgets. Kodak says these have generated $3bn in revenue since 2003.
On Wednesday, Kodak launched a lawsuit against Samsung, alleging that certain Samsung tablet devices infringe Kodak's digital imaging technology. The South Korean firm said the claims were "unsubstantiated".
It comes a week after Kodak launched a similar lawsuit against HTC and Apple over patents related to digital imaging technology.
Former Kodak vice president Don Strickland insists the firm's late entry into the digital market is a key factor in its recent troubles. He claims he left the company in 1993 after he failed to get backing from within the company to release a digital camera.
"We developed the world's first consumer digital camera and Kodak could have launched it in 1992.
"We could not get approval to launch or sell it because of fear of the cannibalisation of film," he told BBC News.
Although Kodak was one of the original inventors of digital photography, it failed to keep pace with developments in the market and competitors steadily eroded its share of the market.
Since 2003, Kodak has closed down 13 manufacturing plants and cut its workforce by 47,000 and there could be more cuts to come.
"Now we must complete the transformation by further addressing our cost structure and effectively monetising non-core IP assets," the Kodak chief executive said on Thursday.
Kodak employs 19,000 workers, but it is not known how many may be affected by the reorganisation.
In its 1980s heyday, the company employed 145,000 people in locations throughout the world.
Mr Strickland believes the firm has little chance of surviving long term.
"There will be no more 'Kodak moments' - after 133 years, the company has run its course."
Others think it may now be a takeover target.
"It is more likely someone will buy them out for their patents, for their intellectual property," technology journalist Kevin Anderson told BBC World.
"Google has been on a buying spree lately, buying up companies for patents. I don't think they will be in the market for them [Kodak], but that might be one attractive element for a potential buyer," he said.