Toshiba's US nuclear business, Westinghouse, has hired bankruptcy attorneys, signalling to investors it is serious about the potential of a Chapter 11 filing.
The Japanese conglomerate brought in law firm Weil Gotshal & Manges to explore the option, but it had not yet taken a decision on a bankruptcy filing, sources told Reuters.
Toshiba's shares closed down 7.2 per cent today.
The firm unexpectedly delayed its financial update last month as it announced it needed more time to probe its US nuclear business after revealing a multi-billion pound hole. It's due to report earnings Tuesday, but a source has told Reuters the likelihood of Toshiba meeting this deadline was "fifty-fifty".
If the firm fails to meet that deadline, it has until 27 March to file or could be delisted.
Although the troubled firm said it's not aware of any intention for Westinghouse to file for Chapter 11 bankruptcy, sources have said it is one of several options being considered. The nuclear business faces cost overruns at two projects.
Toshiba has also hired a Japanese law firm to help estimate the how a US bankruptcy will impact the broader group, sources said.
Earlier this week, Japanese trade minister Hiroshige Seko said a Chapter 11 filing wouldn't necessarily be a negative step. He added Westinghouse was one topic that might crop up in discussions with US officials when he visits in the near future.
"If the US side raises the issue, it will be necessary to discuss it," Seko told a parliamentary committee.
However, one issue may be financing guarantees given by the US government to help fund the construction of reactors at the Vogtle plant in Georgia, one of the two projects at the core of Westinghouse's woes.
A 2014 statement on the US department of energy's website says the loan guarantees totaled $8.3bn (£6.8bn)
Toshiba is also pursuing the sale of most, or even all, of its prized flash memory chip business, which will help protect it against future financial problems. Bids on the company, which Toshiba values at least 1.5 trillion yen, are due at the end of the month.