Filing a joint petition for bankruptcy is a right bestowed solely upon legally married couples in the United States. Because the constitutional rights of same-sex couples to have their marriages legally recognized by the government has been in flux in our country for decades, so has the right of those couples to file for bankruptcy together. In the past few years, two major decisions handed down by the Supreme Court of the United States (SCOTUS) have significantly expanded the rights of same-sex married couples under both federal and state laws—and the Bankruptcy Code is no exception.
Simply because same-sex married couples now have the right to file a joint petition does not necessarily mean that doing so is a wise decision for every married couple. Before filing, every couple should discuss their particular situation with an experienced Long Island bankruptcy lawyer for a thorough case evaluation and advice whether an individual or joint filing is the right strategy. However, the important fact is that same-sex married couples now have the option to make that decision for themselves and are not limited by the law. The following is an overview of the evolution of bankruptcy rights for same-sex couples over the past few years.
Before the United States v. Windsor decision
Section 302 of the United States Bankruptcy Code1 states that a joint bankruptcy case may be filed by a debtor and the “spouse” of that debtor. The bankruptcy laws do not delve into any further analysis or definitions of the term “spouse,” therefore courts had to turn to other laws to determine whether two individuals would qualify as spouses. The Defense of Marriage Act (DOMA)2 was passed by Congress and signed into law by President Clinton in 1996 and the law defined marriage for the purposes of the federal government as a union between a man and a woman. This effectively prohibited the federal laws or courts from recognizing the legality of a homosexual marriage. Since bankruptcy courts are part of the federal court system, bankruptcy judges would not grant a joint bankruptcy petition between two individuals of the same sex who stated they were married.
In 2000, Vermont became the first state to give same-sex couples the same rights under the law as opposite-sex couples by legalizing civil unions. Four years later, Massachusetts was the first state to officially legalize the marriage of same-sex couples. Though California, Connecticut, Iowa, Vermont, New York, and several other jurisdictions followed, spouses in same-sex marriages were still not entitled to the benefits of federal law due to DOMA.
In 2011, the Obama administration made the announcement that the Department of Justice (DOJ) would cease to defend against constitutional challenges to DOMA in court. Though the Bipartisan Legal Advisory Group (BLAG) continued to defend DOMA with the Office of General Counsel, the DOJ decided to stop opposing joint bankruptcy filings by same-sex couples3 in 2011, as well. Despite this progression, many bankruptcy judges continued to dismiss petitions filed by same-sex couples.
Post-DOMA confusion for same-sex couples
On June 26, 2013, the Supreme Court heard arguments challenging the constitutionality of DOMA in the case United States v. Windsor.4SCOTUS ruled that Section 3 of the law defining marriage as only between members of the opposite sex was unconstitutional as it denied equal protection of the laws to same-sex couples as required by the 14th Amendment of the United States Constitution.5 This decision required the federal government to recognize the legality of same-sex marriages for the purposes of receiving the benefits of federal laws, which included bankruptcy laws.
The rights of same-sex couples in bankruptcy court were still a source of confusion following the strike-down of DOMA, however. The Windsor decision transferred the right to recognize same-sex marriages to the states and many states continued to ban gay marriage and to refuse to recognize the legality of marriages performed in permissive states. This caused difficulty because, while some bankruptcy courts approved same-sex joint petitions, others dismissed them because the marriage was not considered valid in that particular state. Even if certain courts wanted to grant a same-sex petition, the lack of recognition by a state caused complications in determining ownership of assets and household income. For these reasons, there was a severe lack of consistency from one court to the next regarding same-sex joint petitions for the next two years.
The Effects of Obergefell v. Hodges
On June 26, 2015, the Supreme Court once again issued a landmark decision in Obergefell v. Hodges6 that deemed all bans on gay marriage in any of the 50 states unconstitutional. This decision extended marriage equality throughout the United States and required that states recognize marriage as a fundamental right for all same-sex couples. Because all couples now have the right to get legally married, the confusion surrounding their ability to file a joint petition for bankruptcy has been eliminated. Now, all bankruptcy courts should allow any same-sex couple who has entered into a legal marriage to also file for bankruptcy as spouses.
The benefits of filing a joint bankruptcy
The ability to file for joint bankruptcy is important for many married couples. Some of the potential benefits of a joint bankruptcy petition are as follows:
Often, if one spouse is in financial trouble, the other one may have significant debt, as well. It is often easier and more cost-efficient for spouses to file together in such situations and now that option is fully available to all legally married couples in the U.S. no matter whether they are same- or opposite-sex.
Filing for joint bankruptcy is not always beneficial, however. For example, if your spouse has substantial individual assets or property, you likely do not want to include them because those assets may be seized and liquidated by the bankruptcy trustee. It is imperative that every couple that is considering bankruptcy consult with a Nassau bankruptcy lawyer who can weigh the pros and cons of joint bankruptcy and advise them of their options.
Contact an experienced New York bankruptcy attorney to discuss your situation today
While the Obergefell decision clarified the rights of same-sex married couples under the United States Bankruptcy Code, it is only natural that many spouses may have questions about the bankruptcy process. Whether you are single or married, you should always discuss how to regain control over your finances with an attorney who understands the constantly evolving bankruptcy laws and how to apply them to your case. You have many different options when filing for bankruptcy and the procedures and rules can be extremely complicated and confusing. At the Law Office of Ronald D. Weiss, P.C., we stay apprised of any evolutions in the law and know how to identify any legal issues in your bankruptcy case and stand up for your rights and interests. Please call our office at 631-271-3737 to find out how we can help you with your bankruptcy case today.