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Cannabis income and federal bankruptcy courts

On Behalf of | Jul 5, 2022 | Personal Bankruptcy

Filing for bankruptcy could save Michigan companies and consumers from the stress and challenges of heavy debts. Federal law guides bankruptcy proceedings, and anyone seeking protection from the courts must understand statutes guide actions. So, someone who fails the means test for Chapter 7 may need to look at Chapter 13. Other rules may place compliance requirements on the debtor. Not complying with the laws and regulations could lead to trouble. Those involved with the controversial new cannabis-related economic sector might need to understand better how this work impacts bankruptcy proceedings in Michigan.

Cannabis income and bankruptcy

Disparities between state and federal law may create problems for debtors involved with the marijuana industry. While medical or recreational marijuana may be legal at the state level, federal law is another matter. Marijuana remains a Schedule I drug, and anyone who sells marijuana or profits from its sale could violate the Federal Controlled Substances Act. Even if the person does not face criminal prosecution, the bankruptcy court could rule unfavorably in some ways.

Question marks may arise when filing for bankruptcy while receiving direct or indirect income from the cannabis industry. No law explicitly bans bankruptcy relief, but some bankruptcy courts dismissed cases when the debtor’s reorganization seemingly violated the FCSA.

Worries about bankruptcy rulings

Involvement in the marijuana/cannabis industry could refer to people who do not own pot dispensaries or grow marijuana. Even someone who provides machinery or equipment to other businesses in the cannabis industry may discover problems filing for bankruptcy. Creditors may petition for dismissal because such machinery providers theoretically profit from federally illegal drugs.

The way one judge rules in one federal court might not be identical to how another judge rules elsewhere. So, someone generating direct or indirect income from cannabis might still find relief in court.