Recently the United States Bankruptcy Appellate Panel of the Tenth Circuit found that a Colorado marijuana business owner could not be awarded bankruptcy relief. The Court noted that even though Colorado has legalized the acts of “[p]ossessing, growing, and dispensing marijuana” these acts are still federal criminal offenses. Thus, it was determined that the debtors could not receive any bankruptcy relief under Chapter 7 because administrating the debtors bankruptcy estate would involve the bankruptcy trustee in administering and/or distributing funds derived from activities that violate federal law. The Court also noted that the debtors could not convert the bankruptcy to a Chapter 13 because they could not propose a feasible Chapter 13 repayment plan without including the income that was derived from activities that violate federal law.
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