The IRS may foreclose on and seize a taxpayer’s home when settlement negotiations break down.  However, there may still be hope.  The situation usually is that an Offer In Compromise has been denied and the taxpayer feels that he owes too much to set up an Installment Agreement.  Many times I can arrange an Installment Agreement work that does not pay the debt in full.  If that does not work, then we will have to appeal to the Taxpayer Advocate for relief under the special exception and hardship rules.  There is a remedy called the Taxpayer Assistance Order that might help in this situation if you qualify.  It helps to keep disastrous results such as you describe from happening. It is in the form of equitable relief rather than legal relief.  Each case will be assessed on an individual basis.