A linear stability analysis is presented to understand the instabilities that arise in an elastic bilayer, consisting of a very thin bottom layer (thickness < 100 nm) that acts as a wetting film and a top layer that acts as an adhesive film, when placed in contact proximity with an external rigid contactor. Depending on whichever layer is more compliant, "squeezing modes" of instability with a variety of length scales ranging from <<3h to <<3h (h: bilayer thickness) are found to be possible. The least length scales obtained are 0.1h. The squeezing instabilities are, however, accompanied by delamination of the film-film interface. The instability length scales, the strength of interactions required, and the delamination decrease as the compliance of the top film increases. Surface tension effects are found to have a stabilizing influence which increases the instability length scales and decreases the degree of delamination at the cost of high interaction penalty.