For at least the past decade, federal bankruptcy courts have routinely prohibited cannabis businesses from seeking protection under federal bankruptcy law, regardless of whether a cannabis business is legally operating under state law.

The automatic stay is a procedural tool in a bankruptcy case that effectively halts efforts by creditors to collect on a debtor’s outstanding obligations. As discussed in more detail in our prior post, immediately upon the filing of a bankruptcy petition, a “bankruptcy estate” is created, which includes virtually all assets of the debtor.