Comment Re:"Just" four million? (Score 3, Informative) 117
Your point is valid but there is a further gotcha.
The company then files the 4 million as a loss-- which results in the irs counting it as income by you which results in taxes due on 4 million and the taxes are not forgivable by bankruptcy. After several years of harassment, wage garnishment, etc. you'll be allowed to settle the tax debt for a smaller amount. If you have the money to pay, it will be about 10 cents on the dollar. If you are really poor, you may not be able to get it forgiven and it just sorta hangs round for a very long time.