Marijuana Bankruptcy: The Answer is Still “No”

The struggles of failing marijuana businesses to wind down and pay creditors in an orderly fashion serve no one. Among the problems marijuana businesses face such as lack of access to banking and onerous taxation stemming from IRC 280E is the lack of access to bankruptcy proceedings. This post discusses a  Michigan-based medical marijuana company that filed for Chapter 7 bankruptcy and the federal court case affirming the dismissal of the marijuana company’s bankruptcy petition. In re: Great Lakes Cultivation, LLC, No. 21-12775.

The dismissal isn’t much of a surprise given past treatment of marijuana businesses seeking bankruptcy protection. See here. Nonetheless the case highlights significant issues faced by marijuana businesses and persons or companies who lend or invest in the cannabis industry, who may struggle to obtain a return of their investment from failing businesses absent taking special measures to securitize the investment.

Here, the company grew and sold medical marijuana pursuant to a license issued in 2019 by the State of Michigan. The company operated out of a leased building and all of its equipment was used in the manufacture of marijuana and its income derived solely from the sales of medical marijuana. The start-up capital for the

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