Your back taxes, interest and penalties can be wiped out by filing bankruptcy. If you qualify, bankruptcy can be the best solution to resolve your crushing tax problems.

Chapter 7 bankruptcy can be used as leverage when negotiating an Offer in Compromise (OIC) with the IRS. When reviewing an OIC, the IRS often estimates a higher payment ability than what the taxpayer proposes. Showing that a Chapter 7 filing could result in the IRS receiving less may encourage them to accept the offer. However, not all tax debts are dischargeable; income tax must meet three specific criteria for discharge. If any criterion is unmet, the debt remains after Chapter 7.

Chapter 13

Chapter 13 bankruptcy is designed for individuals with regular income who are unable to repay their debts in full. Unlike the IRS’s 10-year collection rule, Chapter 13 provides structured repayment plans over three to five years and halts additional interest and penalties, effectively pausing the growth of IRS debt. Priority tax debts are required to be paid in full, and IRS liens may persist after bankruptcy. When most tax debt is classified as priority or liens remain, an Offer in Compromise (OIC) may be a more suitable option. Chapter 13 bankruptcy establishes terms for all creditors and generally results in a quicker resolution compared to an OIC or a traditional installment agreement