Medical Marijuana Businesses Face Unique Challenges in Bankruptcy
Good afternoon, everybody. Edward Kelly here, your OKC bankruptcy attorney with another three minutes to financial freedom. Today a question I get on occasion, are medical marijuana businesses treated differently in bankruptcy? And the answer is a clear yes, they are treated differently.
So for those of you watching who may own a medical marijuana business, unfortunately, because medical marijuana is still federally illegal, they are denied the relief of bankruptcy.
So does that mean you can’t do anything if your business is failing or has problems? No, but it does mean that you’re not going to be able to do a reorganization. However, if what you’re looking at is a liquidation, and let me just review those terms.
A reorganization means we’re going to keep going and reorganize, and we’re going to do that with the help of the bankruptcy court. That’s in the chapter 11, or personally in a chapter 13, but we’re talking about a business here, or a liquidation. So if you are liquidating a medical marijuana business, it is very probable that the only exposure you may have beyond the assets of the business is your own personal liability, and those things may be inextricably tied together.
So what you can’t do is get a trustee to take over and oversee the liquidation of your assets, typically for those businesses. I’m not super familiar, but the growing equipment and perhaps the inventory that’s left, accounts receivable, so forth. You’re not going to be able to use the court to have a trustee oversee the liquidation as far as the business goes, but if those are also owned by you personally, or your interest in that equipment, you can.
A trustee will essentially oversee the liquidation of those assets through a personal chapter 7. So the door is not completely shut. Anyone has a right to do a personal chapter 7 bankruptcy, and any debt that might reach you, I shouldn’t say any debt, but you know the normal debts that are going to extend to you personally are dischargeable. However, the business as an entity cannot itself file bankruptcy.
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If you need further clarification on that, you can always reach out to me, an Oklahoma debt lawyer, at oklahomacitybankruptcyattorney.pro and I can go over it with you in more detail.