Talks between the Treasury Department and lenders aimed at keeping Chrysler LLC out of bankruptcy broke down late Wednesday, making it all but certain that the car maker will file for Chapter 11 protection Thursday, according to people familiar with the discussions.

Administration officials, who have been braced for a Chrysler bankruptcy filing for weeks, say all the pieces are in place to get the country's third-largest employer through the court quickly, perhaps in a matter of weeks.

The talks with Chrysler's lenders broke down after the Obama administration's automotive task force worked into the evening to persuade several hedge funds and other lenders to accept a deal to reduce Chrysler's debt, said people involved in the talks.

The Treasury boosted its most recent offer to lenders on Wednesday by $250 million to $2.25 billion in cash for the banks and hedge funds to forgive $6.9 billion in Chrysler debt, people familiar with the matter said.

J.P. Morgan Chase & Co., which leads the creditor group as Chrysler's largest lender, gave the other 45 banks and hedge funds 90 minutes Wednesday evening to vote on the deal. A large number of the funds voted no and refused to budge, paving the way for an all but unavoidable trip to bankruptcy court, said people close to the talks.

Chrysler's likely trip to bankruptcy court is a watershed moment for an iconic American car maker that popularized the minivan, is the home of the Jeep and managed to rebound from an earlier financial crisis in the late 1970s. But Chrysler's fortunes have faded rapidly since its breakup with Daimler AG two years ago.

A trip through the courts will open a new chapter of uncertainty as the company's lenders and its thousands of affiliated dealers could mount a series of legal challenges to the administration's efforts to pull off a swift reorganization.

If the Obama administration's calculations are correct, the process should pave the way for Italian auto maker Fiat SpA to take over the American company.