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Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 31692
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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I presently have an open chapter 7 bankruptcy case in California.

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I presently have an open chapter 7 bankruptcy case in California. I also have 17k worth of IRS debt from 2007 which I'm attempting to settle. As I was reading in the "Offer in Compromise Booklet" from the IRS, if I have an open bankruptcy case then I'm suppose to get in touch with the my local IRS Insolvency Office. How might I proceed from there?
The Offer-in-Compromise (OIC) program is the only way for you to settle your tax debt for less than what you owe.

There are three payment options: lump sum payment, monthly payments over 24 months or less, or monthly payments over the remaining statute of limitations. Under the new law, applicants must submit a 20% down payment if they choose a lump sum payment plan, or must begin making monthly payments if they choose one of the two monthly payment options.

Also, the IRS intends to crack down on abusive tax preparers who submit offers that do not meet the eligibility requirements. The IRS has also made it easier for you to prepare an offer yourself by making the instructions much easier to read and to follow.

Customer: replied 7 years ago.

Ah yes, but there-in lies the confusion.


As per the booklet:


Do you currently have an open bankruptcy proceeding? You should contact your Bankruptcy Attorney if you are not certain. If you are involved in an open bankruptcy proceeding, contact your local IRS Insolvency office. If you do not know the location of your local IRS Insolvency office, then you may call 1-XXX-XXX-XXXX. They will be able to provide you with the local number. Any resolution of your outstanding tax liabilities generally must take place within the context of your bankruptcy proceeding. If you answered YES to this question, then stop here. You are not eligible to have your offer considered or processed at this time.


It would appear that because I have an open bankruptcy case that I am not eligible for the OIC program and they're referring me to the local IRS Insolvency office.

It is essentially the same process. However, because you have an open bankruptcy, you can't settle directly with the creditor as it would be in violaiton of the bankruptcy rules and also possibly infringe on the rights of other creditors. Instead, you must get the settlement approved by teh court.
Customer: replied 7 years ago.
I see, so do I need to contact my local IRS Insolvency office at all or should I wait until the Chapter 7 discharge is granted then submit an OIC?
<p>My suggestion is that you contact the Insolvency office and try to settle the debt during bankruptcy and have it approved by the bankruptcy court. </p><p> </p><p>It's likely that you'll get more debt relief when you're in bankruptcy.</p>
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Customer: replied 7 years ago.

I've now been issued a chapter 7 discharge. So at this point I would submit the IRS an OIC and attach a 20% down payment?


I did a zero-asset chapter 7 so how would I know what percentage of the tax debt to offer?

You need to contact the insolvency office and work with it to determine the appropriate down payment.