We have written before about the virtual dead end faced by marijuana companies who try to seek protection in the bankruptcy courts. Almost uniformly, bankruptcy courts have shut their doors on marijuana companies, including their landlords and suppliers. These courts have held that although marijuana use may be legal in a majority of the States, it is still illegal under the federal Controlled Substances Act, and the bankruptcy courts cannot provide relief to debtors who are violating federal law.
These prior cases dealt with debtors whose income was, in whole or in part, derived from legal marijuana businesses. But, what about an individual who uses some of his or her income to legally purchase marijuana and who also needs bankruptcy protection? Are the bankruptcy courts off limits to those individuals as well? Recently, a bankruptcy court in Colorado addressed whether the cost of medical marijuana can be deducted from an individual debtor’s monthly disposable income for plan distribution purposes. Unfortunately for individuals who both use medical marijuana and who need to file bankruptcy, the court’s answer was a succinct “no”.