Ambac Financial Group hurried into bankruptcy protection this week because it was worried the Internal Revenue Service (IRS) might gut the entire company — including its sacrosanct bond insurance subsidiary, according to court documents.

The New York-based holding company petitioned for Chapter 11 bankruptcy protection on Monday — three weeks earlier than it had to — in a bid to avoid a scenario in which an IRS collection could detonate $3 billion of termination payments.

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