Marijuana Industry/Assets Barred from Bankruptcy Relief

The Office of the United States Trustee (the “UST”), an arm of the U.S. Department of Justice, just issued a one-page “reminder” letter to all chapter 7 and chapter 13 trustees nationwide: NO MARIJUANA IN BANKRUPTCY. You may read it here, it’s short and to the point. “…all cases… that involve marijuana assets, which are proscribed under federal law, may not be administered under the Bankruptcy Code.” Ha-ha, so funny. This is going to become a huge deal – can’t wait to see what the bankruptcy judges are going to do with this.

Federal Policy

The UST states its policy that it will be moving to dismiss or to otherwise object in all cases involving marijuana assets, even in states where marijuana is legal under state law. Since one of the fundamental policies of the bankruptcy system is that property rights are governed by state law (not any federal law), I know that there will be creative arguments forthcoming.

Kentucky Politics

Kentucky may soon decide whether to join the 29 states who’s legalized the use of medical marijuana (including our neighbor, West Virginia, who recently became number 29). Legalizing recreational pot has been and will continue to be discussed in Frankfort. Marijuana news sources ( and say to keep watching Kentucky as one of the upcoming states for legalization. With our fiscal budget crunches and our perfect growing climate, how can this not happen? There is even a non-profit organization aimed towards legalization of marijuana throughout Kentucky, Legalize Kentucky Now.

Marijuana Watch

Our Firm will be tracking the bankruptcy cases on this looming debate, and we will be watching for our first case where we can tee this up here in our Commonwealth to see what our local judges will be doing with this. The UST implies that the “integrity” of the bankruptcy system is at stake: I agree. Seeking to preclude an entire industry from accessing the system set up to deal with all assets and all liabilities in a centralized forum is a big deal.


By: Laura Day DelCotto


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