Former OJ Simpson attorney F. Lee Bailey just filed for Chapter 7 bankruptcy; according to schedules, the assets appear to be pretty minimal, but the debts substantial -- over 5 million in tax debts to the IRS.
This isn't the start of Mr. Bailey's problems (he had previously been disbarred); but what is interesting is based on the information available, how typical the situation is. Poor record keeping meant that when he fought over his tax bill, he was unable to offer enough evidence to prevail. The tax bill - too large to handle right away- ballooned as interest and penalties piled up over time.
Many small business owners find themselves in a similar situation - some hardship occurs, and the bills start running away from them. Income withholdings are reduced to make it through the month, but that leads to a hefty tax bill down the line. Rinse and repeat, and you find yourself drowning in debt.
What many people don't know (but F. Lee Bailey does) is that bankruptcy gives you some powerful tools for dealing with taxes. In the best scenarios, taxes can be discharged like other bills. Other situations might call for a partial repayment or reducing the value of liens.
Article avilable here