An Alternative to Bankruptcy for Wisconsin Businesses

When is the last time you heard someone describe bankruptcy as a chance to “wipe your slate clean?” It’s an analogy that is bandied about so frequently by people talking about bankruptcy that people don’t think about the fact that it has been decades since school students actually wiped slates clean.

Aside from being outdated, the expression is also inaccurate. Filing for bankruptcy is not as simple or worry-free as wiping a slate. Bankruptcies are time-consuming and messy, and they carry a stigma that is hard to live down.

Wisconsin companies having financial difficulties have the opportunity to avoid bankruptcy by filing instead for a Wisconsin Statutes Chapter 128 Receivership.

What is a Chapter 128 receivership?

Chapter 128 is a relatively unique program that allows struggling businesses (and individuals actually) to push the pause button on their debts so a plan can be developed to get their financial house back in order.

Receiverships get their name from the fact that a central part of the program is the hiring of a receiver who will oversee the filer’s business.

Once the receivership is established, the receiver is required to take an inventory of all assets and assemble a list of all creditors. Just as in bankruptcy, creditors must prove they have a claim against the estate in order to maintain their right to collect.

After they get an idea of the state of the business, a receiver may operate the business in receivership while a plan for satisfying creditors is worked out, sell the business as a whole, or liquidate the business’s assets and satisfy creditors as the statute provides.

What are the benefits of receiverships?

The most appealing aspect of a Chapter 128 receivership is the fact that it is not a bankruptcy. There is less of a stigma that comes with going into receivership.

Troubled business owners often turn to Chapter 128 when they want to sell their business, particularly when there are lots of bank and creditor claims. The receiver oversees the sale, which gives buyers and creditors more confidence that a clean, fair deal is being reached.

Creditors claims can then be paid off or at least paid down, which the creditors like better than going through the bankruptcy process and risking getting nothing.

While a receivership is in effect, creditors may not collect interest, or attempt to get payment without going through the receiver.

Receiverships are cheaper and quicker than bankruptcies because there are fewer hoops to jump through, and less oversight from the court system.

Different rules regarding preferential transfers apply to receiverships, and that can benefit some businesses.

Who can be a receiver?

Anyone who is a Wisconsin resident can be a receiver. However, smart business owners and creditors will generally want whoever is appointed to be the receiver to have experience with the task they are undertaking, and skills that are relevant to the particular industry the business is involved in.

Passports Can Be Revoked or Denied in Cases of Tax Delinquencies

Can the IRS really revoke your passport because of your tax debt?

Alas, it is true. If you owe the IRS substantial back taxes, the government can keep you from travelling abroad, whether for business or pleasure, by denying you the privilege of a passport or revoking the one you already have. At the end of last year, with little fanfare, Congress enacted H.R.22 which added a new section to the tax code entitled: “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.” 

If you owe the IRS $50,000 or more and are worried and confused about your options, or if you have already received a Notice of Federal Tax Lien, you should consult an experienced and knowledgeable tax debt strategies attorney who will be able to provide you with options and put your mind at rest.

Reasons for the Law

Oddly, the law isn’t designed to deal with offshore accounts, criminal tax cases, or even situations in which the IRS fears you will flee your tax debt by leaving the country. The punishment was not crafted to fit the crime, but simply to make those with large debts to the IRS pay what they owe. The law seems to have been enacted more to solve a cash flow problem than to punish the guilty.


Originally proposed to Congress in 2012, the idea of passport revocation was not, at first, thought to be a good idea. When reconsidered in 2015, however, its possible efficacy somehow seemed more appealing. Congress decided that it was a realistic method of challenging those who had to travel for business, wanted to visit relatives abroad, or simply desired a vacation beyond U.S. borders to pay the price of being American citizens before departing.

Understanding the Law

It is interesting to note that there are two government agencies involved in this debt collection strategy: The State Department and the IRS. The law permits The State Department to revoke, deny or limit passports for anyone the IRS certifies as having a seriously delinquent tax debt of more than $50,000. Theoretically, The State Department will act immediately upon being informed of the tax delinquency by the IRS, though of course in reality the government wheels turn slowly. Still, it is necessary to understand the law so that you will not be surprised to find yourself trapped in your own country because of a tax debt.

While many people feel that the IRS should not have the ability to involve itself in passports, others hold that the threshold of $50,000 ensures the federal government will only be restricting travel of those with substantial tax debt who can, more than likely, afford to pay up. The $50,000 amount, however, includes penalties and interest, both of which, as many of us are aware, can accrue rapidly.

Exceptions to the Law

If you are in the process of contesting a tax bill with the IRS or in the courts, the amount you are being billed is not yet considered a “tax debt.” Moreover, if you have begun the process of reimbursing the IRS with regular payments under an installment agreement, your passport will not be threatened. In addition, if you require your passport for “humanitarian reasons,” the state may grant you a passport in spite of your outstanding debt.