In a sign of the times, the Wall Street Journal reports that the U.S. Justice Department has issued a statement saying that people in the marijuana business cannot use bankruptcy when they get into financial trouble.
After an increase in the number of bankruptcies where marijuana assets have been disclosed, the U.S. Trustee Program director reminded trustees who handle consumer bankruptcy cases that marijuana remains illegal under federal law and that they must not handle money from the sale of marijuana-related property.
Even in states where marijuana assets are not illegal, bankruptcy proceedings have come to a halt when those involved in the marijuana industry seek protection. In fact, the disconnect between state and federal law has prompted several bankruptcy judges to kick marijuana growers out of court.
In a 2015 case, a panel of federal judges denied a pot-growing, Colorado couple’s request for bankruptcy, noting that despite pot being legal in the state, the bankruptcy process would put a trustee in violation of federal law.
Some are crying foul, noting the couple is caught between running a business that ‘people in Colorado have declared to be legal and beneficial’ and the law of the United States that the judges are sworn to uphold. Of course, the many who do not support legalization in the first place are on board.
The debate will likely continue with the country out of sync when it comes to the legalization of marijuana. However, if industry advocates have their way, more states, including Illinois, may opt in to the recreational use of the drug. But, at least for the time being, those who are involved in the marijuana business may not seek bankruptcy protection.
Source; Wall Street Journal, “Justice Department Says People in Marijuana Business Can’t Use Bankruptcy”, Katy Stech, April 28, 2017.