It’s been clear for years that state-legal marijuana companies can’t take advantage of federal bankruptcy protections offered to normal mainstream businesses, but now, a federal court in Massachusetts has ruled that the same protections are also off-limits to cannabis employees.
The ruling stems from an attempt by a cannabis shop employee named Scott Blumsack, according to BusinessWest.com, who tried to file for personal bankruptcy in 2021. But a bankruptcy trustee pushed back on the petition and argued that it was illegal because of his connection to a federally illegal industry.
Ultimately, the U.S. Bankruptcy Court for the District of Massachusetts ruled that under Chapter 13 bankruptcy rules, any reorganization plan submitted must be done “in good faith and not by any means forbidden by law.”
The court found that Blumsack’s proposal to repay his debt through Chapter 13 couldn’t be allowed precisely because his job duties “require that he act in violation of federal criminal statutes,” BusinessWest.com reported.
The case is likely to set a precedent for other courts to follow, in the absence of federal cannabis reform by Congress.