Same-Sex Couples and Bankruptcy

by Hermin Dowe on October 20, 2014

In February, Attorney General Eric Holder issued a statement that instructed U.S. Justice Department employees across the country to provide all of the benefits held by heterosexual married couples to same-sex married couples. This includes death benefits, prison visitation rights, and the ability to jointly file for bankruptcy, even in states where their marriages are not recognized. Such a decision is a huge victory for equal rights, but it does not clear up all of the legal ambiguities about filing for bankruptcy jointly. It is important to know what is required when you file, depending on the state you are in.

Is Same-Sex Marriage Recognized?

The most common issue that most same-sex couples face is that differing branches of government have different stances on recognizing those marriages. Attorney General Holder’s directive applies to the executive branch, which contains the Justice Department, and that includes the U.S. Trustee Program, which oversees all bankruptcy filings. However, there is no sweeping decision stating that the courts must also effectively recognize these marriages. Thus, it is a reasonable possibility that in a state that has not yet legalized same-sex marriage, a same-sex couple would be able to file for bankruptcy due to the federal directive, but have their petition invalidated by a judge who holds that their marriage is not legal under state law. As of this time, there is simply no law regulating how a bankruptcy court determines the validity of a marriage, whether same-sex or not.

More involved problems may crop up if a couple can manage to file jointly under federal law. One that sometimes leaves same-sex couples in legal trouble is the question of spousal support. Under federal law, spousal support is generally non-dischargeable in bankruptcy. However, under state law, if a party is ruled not entitled to spousal support, that may completely alter that party’s finances. Another problem is the question of meeting the means test for Chapter 7 bankruptcy. If your income is too high, you are not permitted to file Chapter 7, and must file via Chapter 13. Your spouse’s income is included in the calculations. Heterosexual couples do not have to face the uncertainty of their marriage being labeled invalid; they can plan for their financial future. Same-sex couples may be ambushed by activist judges and wind up having to file completely different plans.

Same-sex marriage is legal in California, and marriages from other states are generally honored, so difficulties for same-sex couples should be at a minimum in this state. California has very often led the way in equal rights for same-sex couples; challenges to the Defense of Marriage Act actually began in earnest in California bankruptcy court. In 2011, the Bankruptcy Court for the Central District of California allowed a gay couple to file jointly, stating that no couple should be entitled to fewer bankruptcy protections than any other. It is incumbent upon us to make sure that equal rights are available to any couple in this regard.

Speak with a Bankruptcy Attorney

Dowe Law has a tradition of excellence in bankruptcy cases, and if you are new to California, we can help you get squared away. Contact us for a free consultation. We serve Contra Costa, Solano, and Alameda County.

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