Bankruptcy versus IRS Offer in Compromise

For some people, bankruptcy can be the right way to go. While
bankruptcy will not erase most tax debt, the bankruptcy court
determines what you pay each creditor, and may remove some of the
penalties and interest, depending on the case. The interest rate that
the IRS charges, to be honest, isn’t that bad. The rate is adjusted
several times per year, and it currently sits at 6%. What kills people
are actually the penalties. It is not uncommon for our clients to max
out all their penalties, which tacks on a whopping 45.5% to their
principal, and THEN interest accrues on the whole thing.

To determine whether bankruptcy is the best route for you, you’d have
to consult with a bankruptcy, as I am not a lawyer and cannot provide
any sort of legal advice. If *all* you have is IRS debt, and don’t
have significant other creditors and/or don’t want the bad credit
associated with bankruptcy, but you cannot otherwise go on a monthly
payment plan, then I would encourage you to consider an Offer in
Compromise to the IRS. It’s a good non-bankruptcy alternative to folks
that might otherwise have no other choice but to file Chapter 7, but
would only be filing chapter 7 because of their IRS debt.

I hope that this helps. Please let me know if you have any other questions.