If You Own a Medical Marijuana Business, You Can’t Do a Bankruptcy, but You Do Have Options
Video Transcribed: How is a medical marijuana related bankruptcy different from other bankruptcies? Edward Kelley here, bankruptcy attorney for Wirth Law, and I will answer that question for you right now. Pretty simple answer. Because marijuana is still federally illegal, as is the cultivation of same, you are very limited in what you can do. It doesn’t mean you can’t do an Oklahoma bankruptcy, but it can’t be based on your marijuana business.
How does that play out in practice? Well, if you’ve had a medical marijuana business, and for whatever reason you’ve gone under, you are not going to be able to do a business bankruptcy under any circumstances. For example, if you have some kind of LLC that maybe you wanted to use a seven, although you don’t get a discharge on an LLC, but to get rid of your assets, not going to be able to do it.
Of course, you personally can always do a bankruptcy. And if you don’t have income and if you don’t have assets that you’re worried about losing, then you’re going to be all right. And I get this question more often in connection with the new Small Business Reorganization Act of the Chapter 11, that if a marijuana business has gotten in trouble and wants to reorganize, well, bad news.
As of now, because bankruptcy is all federal, you’re not going to be able to utilize bankruptcy relief for a marijuana related business either. You’ll have to look at state court receiverships and other areas you can find out about from other attorneys here at Wirth and on our Make Law Easy videos.
Hope that’s not just bad news, but because marijuana is not recognized as a legal substance at this point by the federal government, you’re going to be out of luck. But on the side note, that certainly does not prevent you as an individual from doing a Chapter 7 liquidation or a Chapter 13 personal reorganization with what you’ve got left from the business.
However, you’re going to be, have to be careful about assets too. If you still have crops, if you still have equipment, although, they’re not prosecuting marijuana related things federally, at least not on a small scale at this point, jury’s still a bit out on how that would be treated in a bankruptcy.
If you need to liquidate a medical marijuana business, you might want to take care of that, sell your stock and convert everything, legally of course, before you try to get in for any kind of federal relief. That’s the good news and the bad news.