I had a prospective bankruptcy client come into my Houston law office today, with IRS problems. He had other debt also, but the IRS was the one worrying him. They were about to levy on his paycheck. Most creditors in Texas cannot do that, but the IRS is one of the exceptions.
After reviewing his other options, he is likely going to file a Chapter 13 bankruptcy, and propose to pay the IRS over a 5 year period of time. As soon as we file the case, the IRS is stayed or stopped from trying to take his paychecks, or any other property of his.
They can't send him bills or notices any longer, trying to collect the IRS debts. Also, in his case it will stop any additional interest or penalties from accruing, which will save him money. Some taxes can even be completely discharged or cancelled in bankruptcy, but they must meet certain requirements.