The Utah legislature is poised to pass several laws this session that will directly impact bankruptcy cases in Utah. Most people know that bankruptcy cases are governed by federal law (Title 11 of the United States Code). However– changes in laws that involve property ownership are always relevant in bankruptcy cases, because property ownership is governed by state law. Changes to the Utah Exemptions Act are important for all bankruptcy cases, because Utah law has opted out of the federal exemption scheme. see Utah Code Ann. 78B-5-513.

Medical Marijuana

I support SB 259, which permits an individual with a ‘qualifying illness’ to use cannabis and cannabis products. I am a strong supporter of the addiction recovery community and support abstinence treatment (such as the 12 steps). Nevertheless- I do support this bill, primarily because I was convinced by a client of mine who suffers from a debilitating disease and only finds medical relief through cannabis.

One interesting question, to me at least, regarding the medical marijuana act, is how it will impact bankruptcy cases. In May, 2015 the Colorado law firm of Otten Johnson discussed several new issues that arose in Colorado among business bankruptcy cases and the quandary between state laws that legalize cannabis and the federal laws that criminalize it. Several bankruptcy cases were dismissed, or converted to Chapter 7, because the business debtor operated marijuana dispensaries that are in direct violation of federal laws. Read the interesting synopsis here. It will be interesting to see if these type of issues arise in business bankruptcy cases in Utah should SB 259 pass.

From my reading of various legislative updates, I see two bills that may significantly impact new bankruptcy cases in Utah

HB 290 sponsored by Rep. Kraig Powell (R-Heber City) amends the terms “husband and wife” throughout the code to “spouse” or “married couple” as needed to retain the meaning of the statute. This impacts the homestead exemption and other areas involving the ownership of property between spouses. These changes are significant, not only in the exemptions act, but in all areas in Utah law that describe property ownership. As stated, property ownership is governed by state law, and these changes could have a profound impact on individual bankruptcy cases – particularly if the case involves a non-debtor spouse.

HB 165 sponsored by Rep. Brad Dee (R-Ogden) and Sen. Lyle Hillyard (R-Logan) amends the Act to exclude disability and veterans benefits from property that is exempt from execution if the recipient has been convicted of a felony and ordered to pay restitution to the child victim. As soon as the restitution has been paid, the exemption comes back into force. I’m not sure why this amendment did not take place in Utah Code Ann. 78B-5-508, where certain claims are allowed to attach against exempt property and why it is limited to disability and veterans benefits.

In other bankruptcy news, national retailer Sports Authority filed for Chapter 11 bankruptcy protection in Delaware. USA Today reports that SA “would seek to sell or close about 140 stores, or nearly one-third of its locations. The company admitted that it had lost market share to online retailers, became swamped with $1.1 billion in debt and failed to keep up with consumer trends, such as golf’s decline in popularity.”

In particular, CNN Money reported that the SA located at the Newgate Mall Ogden would be among the 140 stores to shutdown. Stores in Sandy, West Jordan and Taylorsville will also be closing. Sports Authority is not my store of choice for athletic gear, although I buy the occasional free weight and bike part. I do know that Santa was less than pleased with Sports Authority’s delivery system this past Christmas when it took 3 weeks to receive the family air hockey table because the delivery guys were shocked when my office wasn’t open at 11 pm. My guess is that Dicks, or another national outfit, will purchase SA’s assets, which is privately owned by a private equity group in L.A.