How to Resolve IRS Debt Without Bankruptcy

Introduction: There’s a Better Way Than Bankruptcy

If you’re overwhelmed by IRS debt, bankruptcy might seem like the only way out. But in many cases, you can get IRS debt relief without filing for bankruptcy — and avoid the long-term consequences that come with it.

Bankruptcy should be the last resort — not the first plan.

In this guide, we’ll walk through proven alternatives to bankruptcy that work for many Orange County taxpayers, including payment plans, Offers in Compromise, hardship relief, and more.

🧠 Why People Consider Bankruptcy for IRS Debt

Common reasons include:

• Wage garnishment or levies
• Years of unfiled returns
• Balances over $50,000
• Pressure from the IRS or private collectors
• Fear of asset seizure

But before jumping to bankruptcy, understand your other options — many of which can stop IRS collections while you recover financially and protect your assets without the lasting damage to your credit.

🚫 What Bankruptcy Doesn’t Always Solve

Contrary to popular belief, not all IRS debt is dischargeable in bankruptcy.

Requirements for IRS debt to be discharged:

• Taxes must be income-based
• Debt must be at least 3 years old
• Return must have been filed at least 2 years ago
• Assessment must be 240+ days old
• No fraud or tax evasion involved

If any of these conditions aren’t met, bankruptcy won’t wipe out the tax debt.

✅ 5 Proven Ways to Resolve IRS Debt Without Bankruptcy

✅ 1. Set Up an Installment Agreement

This is the IRS’s version of a payment plan. It can help you spread your tax debt over time without bankruptcy while staying compliant.

Types:

• Guaranteed Installment Agreement (under $10,000)
• Streamlined Installment Agreement (under $50,000)
• Partial Pay Agreement (for those who can’t afford full repayment)

✅ Stops collection actions

✅ No need to file bankruptcy

✅ Helps rebuild compliance

👉 FTB Offer in Compromise vs Installment Agreement – Which Is Better?

✅ 2. Submit an Offer in Compromise (OIC)

If you qualify, you can learn how to settle your IRS debt for less than owed by showing the IRS you cannot pay in full and that your offer is the maximum they can reasonably collect.

• You cannot pay in full
• Your offer reflects the most the IRS can reasonably collect
• You are in full filing compliance

✅ IRS settles debts for pennies on the dollar in qualified cases

✅ Stops levies and garnishments during review

✅ Prevents the need for bankruptcy

👉 How Much Will the IRS Usually Settle For?

✅ 3. Qualify for Currently Not Collectible (CNC) Status

If paying anything right now would create a financial hardship, the IRS may:

• Pause collections
• Stop sending notices
• Review your situation annually

✅ No payments required

✅  Protects wages and bank accounts

✅ Preserves options for future settlement

✅ 4. Request Penalty Abatement

Penalties can make up 30–50% of your balance. By requesting abatement, you can cut penalties to lower your overall debt and make other resolution options more feasible.

✅ Reduces total balance owed

✅ May make Offer in Compromise more successful

✅ Can be requested by your CPA without court involvement

✅ 5. File Corrected or Missing Returns

Sometimes, the tax debt is inflated due to:

• IRS substitute returns
• Missing deductions or credits
• Incorrect income reporting

✅ Filing or amending returns can dramatically reduce your balance

✅ Required before applying for any resolution program

👉 How to Get Back Into Compliance with the FTB (IRS process is similar)

🛑 What NOT to Do

• Don’t ignore IRS letters
• Don’t use cash advance or payday loans to pay IRS balances
• Don’t wait until garnishment begins
• Don’t submit partial payments without a plan — it won’t stop enforcement

🧭 How Boulanger CPA Helps Orange County Taxpayers

We help individuals and families in Irvine, Anaheim, Santa Ana, Fullerton, and beyond:

• Review IRS account transcripts
• File or amend tax returns
• Submit Offers in Compromise and Installment Agreements
• Stop garnishments and levies
• Help you avoid bankruptcy with a smarter plan

📞 Call 657-218-5700

 🌐 www.orangecounty.cpa

📣 About the Author

Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, a boutique tax resolution firm based in Orange County, California and trusted by high-income individuals and business owners across Southern California.



He is the author of Defend What’s Yours: A California Taxpayer’s Guide to Beating the IRS and FTB at Their Own Game, available now on Amazon. The book offers a step-by-step plan for resolving IRS and FTB tax debt without losing your business, your home, or your peace of mind.

With over a decade of experience resolving high-stakes IRS and State tax matters, Marc brings strategic insight to complex cases involving wage garnishments, bank levies, unfiled returns, and six-figure tax debts. He is known for helping clients reduce or eliminate tax liabilities through expertly negotiated settlements and compliance plans.

Marc is a Certified Public Accountant licensed in California and Oklahoma and holds the designation of Certified Tax Representation Consultant. He is a member of the American Society of Tax Problem Solvers (ASTPS) — the national organization founded by the educators and practitioners who have trained thousands of CPAs, EAs, and tax attorneys in IRS representation strategy.

Every case is handled with discretion, proven methodology, and direct CPA-led representation — not call center scripts.

📍 Learn more at www.orangecounty.cpa or call (657) 218-5700.