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Why did Michigan Department of Treasury keep my income tax refund when I'm in bankruptcy?

Why did Michigan Department of Treasury keep my income tax refund when I'm in 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.