Offer in Compromise or Bankruptcy for Personal Taxes
I received this question recently from this site:
Need to decide which to file first bankruptcy or OIC. Have outstanding medical
bills of approx 12,000 and credit card debit of approx 19,000 plus IRS of
$80,000. IRS debt is old and they have filed liens, current status collectible.
Heart surgery in 2007 and am disabled. Only income alimony, no assets.
The question that I hear you asking is whether to file bankruptcy or your IRS offer in compromise first – not should you either file bankruptcy or an offer in compromise. The IRS debt can not be collected while you are in bankruptcy so you do not have to worry about the IRS levying your disability income or bank accounts while you go through bankruptcy. If you have definitely decided that you are going to file bankruptcy, then in most circumstances, I would recommend that you file bankruptcy before you file your offer in compromise with the IRS because some of your tax liability MAY be dischargeable in bankruptcy. It is possible that all of your tax liability could be discharged; and, it is possible that none of your tax liability can be discharged. It depends on the type of tax and when that tax was assessed. You should check with your bankruptcy attorney to determine which periods and what amounts may be dischargeable. Then, after your bankruptcy is discharged, you will know exactly what tax liability remains and what you should include in your offer in compromise with the IRS.