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The U.S. Bankruptcy Appellate Panel has found that an employee of a state-licensed cannabis business could not avail himself of Chapter 13 protection.
The debtor, Scott Blumsack, is a full-time employee of Society Cannabis Co., a Clinton-based retailer, wholesaler and producer of cannabis products. He manages one of its retail operations and supervises 19 other employees.
When Blumsack petitioned for bankruptcy under Chapter 13, he sought to fund his plan with income from his $75,000-a-year job with Society.
A U.S. Bankruptcy Court judge dismissed Blumsack’s petition, finding that because the sale of cannabis is still illegal under the federal Controlled Substances Act, or CSA, Blumsack’s plan should not be confirmed and his petition should be dismissed.
While finding that the Bankruptcy Court erred in fashioning a rule that employees in the cannabis industry are flatly barred from seeking Chapter 13 relief, the BAP affirmed dismissal of Blumsack’s petition.
“[T]he nature of the debtor’s employment, by itself, does not render him ineligible to file a chapter 13 petition in good faith [but] his Plan would have funneled his income from the dispensary into the chapter 13 trustee’s office, and from there to creditors, bringing the proceeds of