I Work in the Cannibis Industry. Can I File Bankruptcy if Needed?

In a recent case that could have significant implications for individuals employed in the cannabis industry, a bankruptcy court in Massachusetts dismissed a chapter 13 bankruptcy case because the debtor was employed by a marijuana dispensary. The court’s decision highlights the complex legal landscape surrounding cannabis, which is legal for certain purposes in many states but remains illegal under federal law.

The debtor in the case, identified as working at a retail cannabis dispensary, proposed to use his wages from this employment to fund a chapter 13 plan of reorganization. Chapter 13 of the Bankruptcy Code allows individuals with income to repay creditors over a period of three to five years. However, the court found that the debtor’s employment in the cannabis industry violated federal law, as marijuana is classified as a Schedule 1 controlled substance under the federal Controlled Substance Act.

Despite arguments that the debtor was only an employee with no ownership interest in the cannabis business and that denying bankruptcy relief would impact many individuals with similar employment circumstances, the court held that the debtor’s plan could not be confirmed because it would be funded by wages derived from federally illegal activities. The court viewed permitting the debtor to obtain bankruptcy protection while continuing to work in the cannabis industry as an abuse of process and a violation of federal criminal laws.

This case is part of a broader trend in bankruptcy courts, which have generally been unsympathetic to cases involving cannabis businesses. While some courts have indicated that bankruptcy relief might be possible depending on the degree of connection to the cannabis industry, individuals working in this sector should be aware that their debt relief options are limited.

The dismissal of this case underscores the challenges faced by individuals employed in the cannabis industry, where state and federal laws are in conflict. It also serves as a reminder of the importance of understanding the legal implications of employment in industries that operate in a legal gray area. As the legal landscape surrounding cannabis continues to evolve, individuals working in this industry should seek legal advice to navigate the complexities and limitations of bankruptcy law.