Same-Sex Marriage and Bankruptcy

With the Supreme Court’s hearing two major cases addressing same-sex marriage this term, Hollingsworth v. Perry and United States v. Windsor, we have been getting questions about how same-sex marriages are dealt with in bankruptcy. The answer is, “it depends.”

The first issue is the federal Defense of Marriage Act (“DOMA”). Sections 2 and 3 of DOMA are relevant here, and state:

Section 2. Powers reserved to the states

No State, territory, or possession of the United States, or Indian tribe, shall be required to give effect to any public act, record, or judicial proceeding of any other State, territory, possession, or tribe respecting a relationship between persons of the same sex that is treated as a marriage under the laws of such other State, territory, possession, or tribe, or a right or claim arising from such relationship.

Section 3. Definition of marriage

In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word ‘marriage’ means only a legal union between one man and one woman as husband and wife, and the word ‘spouse’ refers only to a person of the opposite sex who is a husband or a wife.

Section 3 currently prohibits same-sex married couples from filing a joint bankruptcy petition. Although the Obama administration decided in February of 2011 that DOMA was unconstitutional, and directed that it not be defended in Court, whether a same-sex married couple can file a joint petition can still depend on where the couple lives. Section 2 of DOMA would allow a state such as Virginia, which prohibits same-sex marriage and does not recognize as valid a same-sex marriage from another state, from recognizing a marriage that would be valid in the District of Columbia. Since there is no federal law of marriage, federal courts–including the Bankruptcy Court–will look to state law to determine whether a couple is married, and thus able to file a joint bankruptcy petition. If the couple were not validly considered married under state law, they would not be considered married for the purposes of filing a joint bankruptcy petition. In Maryland, where I practice, same-sex marriage is legal, and a joint bankruptcy petition can (and has) been accepted by the Court on behalf of a married same-sex couple.

If DOMA is overturned in a narrowly-written ruling that covers only Section 3 (Section 2 not being directly at issue), the above-described prohibition against a joint petition in states that do not recognize same-sex marriage could still be allowed. If, however, a broad decision is entered prohibiting discrimination against someone on the basis of their sexual preference, laws and constitutional provisions such as those in Virginia would be stricken, and same-sex married couples across the country could file a joint bankruptcy petition.