A bankruptcy court's recent denial of a debtor's petition for bankruptcy relief on narrow grounds casts a long shadow on the viability of bankruptcy relief for those employed in the cannabis industry. Though confining the court's holding to this debtor's case, the court concluded that because the debtor engaged, and intended to continue engaging, in activities that violate the Federal Controlled Substances Act, the debtor could not objectively have filed for bankruptcy or proposed a plan of reorganization in good faith, as required by Federal bankruptcy law. While the court noted the debtor's warning that dismissing the case of "a 'mere employee' with no ownership interest in a marijuana business may lead to vast denials of bankruptcy relief for other debtors with employment or other relationships with cannabis-related activities," the court declined to extend its ruling beyond the facts before it.
The debtor in this case worked as a "budtender" at a cannabis dispensary in Massachusetts. The debtor's role later expanded into management but at no point did he possess ownership interest in the cannabis business. The debtor proposed to fund his reorganization plan with wages earned from his employment and had no intention of discontinuing his work in the cannabis industry.
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