Looming income tax debt can be daunting and create financial stress. What are your best options to resolve the debt and would filing bankruptcy help? Here is the breakdown of how tax debt is handled in the two main types of consumer bankruptcy.Chapter 13 bankruptcy is a debt repayment plan. While it is still possible to discharge or eliminate a portion of debt through a Chapter 13 plan, the focus is repayment of debt with court protection from creditors. This includes State of Michigan Income tax debt as well as IRS tax obligations.The key to how the debt is handled is based on:The age of the tax debtThe amount of time that has passed since the tax returns have been filed, including whether the tax returns were filed late.