Bankruptcy for TaxMasters, an IRS foe

Bankruptcy filing by TaxMasters puts focus on its aggressive ads. The Houston firm filed for bankruptcy after Texas' attorney general sued it for misleading advertising, .

Larry Downing/Reuters/File
Attorney General of Texas Greg Abbott, shown here in a 2005 file photo in Washington, has sued Houston firm TaxMasters for misleading ads. This week, TaxMasters filed for Chapter 11 bankruptcy.

TaxMasters Inc. has filed for bankruptcy protection following a legal challenge from Texas prosecutors who say the company's famed TV commercials mislead potential customers.

The Houston-based tax resolution company filed Chapter 11 reorganization documents in federal court on Sunday.

The filing says TaxMasters has assets of less than $50,000 and estimated liabilities of $1 million to $10 million.

Company founder and president Patrick Cox fronts the company's national advertising campaign.

KHOU-TV says Texas is suing TaxMasters for violating the Texas Deceptive Trade Practices Act. It says TaxMaster commercials encourage people to call for a free consultation with a tax specialist but the calls are answered by salespeople unqualified to provide tax advice.

A TaxMasters spokesman and attorney did not immediately respond to calls for comment Monday.

RELATED: Do you need tax software? Five questions to ask.

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