Ms. Marinello favored making a significant partial payment, which she believed would appease creditors and avoid bankruptcy, said people familiar with the matter. The board argued it was better to negotiate with creditors and stockpile cash for a prolonged dry spell, these people said. Ms. Marinello was outnumbered, some of the people said.

On Thursday afternoon, there was still hope a deal might be struck to give the company more time, these people said. By midday Friday, the prospect faded when the top lenders wouldn't budge: Hertz's operations were losing more than $200 million a month, before having to make lease payments of roughly twice that, the people said.

Around 10 p.m. Friday, Hertz filed for bankruptcy without a clear plan with creditors in place -- a rare move for a company of its size.

Since equity holders rarely survive a bankruptcy, Mr. Icahn, who owns nearly 40% of Hertz, is expected to lose his entire roughly $1.5 billion investment. That includes more than $200 million of new shares bought last summer to help it pay down debt. People familiar with the matter said he might not be entirely done with the investment. He could invest further as the company emerges from bankruptcy.

--Alexander Gladstone contributed to this article.

Write to Matt Wirz at matthieu.wirz@wsj.com and Cara Lombardo at cara.lombardo@wsj.com