Is Bankruptcy relief available to Medical Marijuana Licensed Caregivers and Marijuana Growers

The Michigan Medical Marijuana Act (MMMA), allows a person, who complies with this act, to for example, run a business cultivating, possessing, and selling medical marihuana.

Assuming that this person is within compliance of the MMMA and without getting into the specific nuances of the law, runs a legally legitimate business out of his home and property by being a licensed caregiver and grower as defined under the MMMA. If this person were to seek relief by filing a bankruptcy, would the Bankruptcy Court grant or deny this request for relief?

Let's create a scenario for illustrative purposes, that the person who is legally selling medical marijuana in Michigan, happens to be behind on home mortgage payments and has a foreclosure sale date pending. This person also has some other debt issues, and thus is seeking to file a bankruptcy to stop that foreclosure sale, and get a fresh start from their financial distress. This debtor intends to continue to operate their medical marijuana business as this provides a source of income. If this debtor were able and eligible to seek and file for bankruptcy relief, that debtor would find that because he is lawfully engaged in the marijuana industry under Michigan law, but in violation of the Federal Controlled Substance Act, this debtor would be precluded from seeking bankruptcy relief. Thus, if this debtor were to file for bankruptcy relief, the U.S. Trustee would file its motion to dismiss that case, of which the debtor would not prevail. Moreover, even if the debtor were only a worker currently working for a marijuana dispensary, it would still be the same outcome. In that as long as the source of income is directly tied into marijuana it would conflict with the Federal Controlled Substance Act, and thus by extension, a Bankruptcy Court would deny that person working in a marijuana dispensary, their request for bankruptcy relief.

What is legal at the state level, but criminalized at the federal level, provides the deciding course of action that a Trustee and the Court must take based on their oath to uphold, in the case, the federal law that controls the outcome of my above example. Moreover, until the federal legislative branch takes up this particular issue, the outcome will continue to be the same.

Also, note that every bankruptcy petition filed contains the duty of the debtor to be truthful, honest, disclose all assets, income etc., and signs that petition under penalty of perjury. These debtor duties are contained within the bankruptcy code, found under section 527(a)(2) and section 342(b)(2)(A)&(B). The U.S Attorney's office and the Trustee has the power to pursue fraud, active concealment of assets and income etc., by means such as criminal prosecution, penalties and actions of denying a bankruptcy discharge to name but a few for example, if the debtor violates their duty to fully disclose, and/or commits fraud and concealment. Thus, the Debtor in my above example, is duty bound to disclose that fact that he intends to continue to run a medical marijuana business from the home and property, and to not disclose would be in violation of section 527 and section 342 of the bankruptcy code.

The purpose of this blog is not to provide legal advice, but to merely give you an understanding that if you intend on pursuing a bankruptcy, there are many complexities and nuances and that some issues, if not identified prior to a bankruptcy filing can create major problems on the debtor who files for bankruptcy relief. I always find it best advice to hire an attorney who specializes in bankruptcy law, as there are too many pitfalls that await an individual who is not fully prepared to understand all the potential issues.

If you are struggling with too much debt, being garnished by a debt collector, medical debt, behind on mortgage payment, behind on vehicle payments etc., then please CALL US TODAY at 989-891-9780 for your free initial bankruptcy consultation. It is always good due diligence on your part to know all your options at your disposal to deal with this financial distress you find yourself in.

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