Bankruptcy

No. Michigan Department of Treasury cannot set up an installment agreement if a taxpayer or account is in bankruptcy. Treasury can accept voluntary payments from the taxpayer. These payments will not be returned to the taxpayer, even if the debt is ultimately discharged.

Billings will be mailed if any of the following are true:

• New assessments are issued. Both an intent to assess and a final assessment must be system issued before an assessment can be changed to bankruptcy status.
• The debt was not dischargeable in bankruptcy, which caused the assessment to be changed to a collectible status.
• Actual returns were filed, assessments were corrected and a letter was issued showing the corrected amount.
• Treasury is not aware of the bankruptcy.

Michigan Department of Treasury's ability to withhold a taxpayer's income tax refund is determined by the chapter under which the bankruptcy was filed:

• Chapter 7 - The refund is held until a discharge is issued.
• Chapter 11 (Business Filed) - Bankruptcy will offset an assessed officer's refund when:
  1. The business has defaulted in Chapter 11 plan payments.
  2. The Pre-Petition debt exists and is not included for payment through the business bankruptcy.
  3. The confirmed plan will offset for Post Confirmation debt.
• Chapter 11 (Corporate Officer filed) - If a plan has been confirmed and there are post-confirmation debts, Treasury will apply corporate officer refunds to post-confirmation assessments.
• Chapter 13 - Income tax refunds are returned to taxpayers.