Posted On February 21, 2018
Bankruptcy ban on marijuana businesses

Bankruptcy ban on marijuana businesses

For many business owners, filing bankruptcy can offer real benefits. If your business is hurting, bankruptcy can give it a much-needed second chance. Bankruptcy can eliminate your old tax liabilities and facilitate the rebuilding of your credit.

However, if you’re a marijuana business owner-or even if you’re involved in a business only loosely connected to marijuana-bankruptcy relief is not an option for you.

Even though marijuana has been legalized for recreational and medicinal use in Nevada, it is still illegal in the eyes of the federal government. The United States Department of Justice (DOJ) has announced that any businesses with marijuana-related assets are prohibited from filing bankruptcy. The DOJ cites the following rationale in its decision:

  • A business owner may not use bankruptcy relief for assets of a business if that business is federally illegal-regardless of whether that business is legal at the state level.
  • Bankruptcy trustees and estate fiduciaries should not be administering assets that could put them in violation of the federal law.

The exemption not only affects businesses directly involved with the production and distribution of marijuana, but also business people indirectly involved with the drug. For instance, if you invest in a marijuana business, or if you rent out a piece of property to a marijuana business owner, you may not file for bankruptcy.

The disconnect between federal and state laws pertaining to marijuana use has created a lot of complications for members of the marijuana industry. The DOJ has responded by creating disincentives for anyone to be even peripherally associated with the industry.

If you’re a marijuana business owner in Nevada facing financial challenges, talk to an experienced bankruptcy attorney to learn about what options might be available to you.