Joint Bankruptcies For Same-Sex Married Couples

Marlene G. Weinstein

A bankruptcy judge in the United States Bankruptcy Court for the Central District of California recently issued a decision in the case of In re Balas and Morales (June 2011) 449 B.R. 567 in which the court held that the Defense of Marriage Act (“DOMA”), as applied to a same-sex couple legally married under state law, violated the couple’s equal protection rights afforded under the Fifth Amendment of the United States Constitution.

Mssrs. Balas and Morales were a lawfully married couple under the laws of the State of California when they filed a joint bankruptcy petition under Chapter 13 of the Bankruptcy Code.  In response to the filing, the United States Trustee (“UST”) moved to dismiss the case unless Mssrs. Balas and Morales agreed to sever their cases into two (2) separate bankruptcy cases.   They refused and the matter was submitted to the court.  In denying the UST’s motion, the court found that DOMA did not serve an important governmental interest, or advance any valid governmental interest, and could not be upheld under either heightened or rational basis scrutiny.

Following the Balas and Morales decision, twenty (20) federal judges in southern California joined together to rule that DOMA does not bar same-sex married couples from filing joint bankruptcy petitions.

Although not given as much national attention as the Balas and Morales case, a New York bankruptcy judge also denied the UST’s motion to dismiss a joint Chapter 7 case filed by a same-sex couple who had been legally married.  The court held that “cause” did not exist under 11 U.S.C. §707(a) to dismiss the case solely on provisions of federal legislation, DOMA, that the executive branch had declined to enforce.  See In re Somers (May 2011) 448 B.R. 677.

No formal opinion has been issued by any of the Bankruptcy Judges of the Northern District of California as to how they would rule if the matter was brought before them.  However, the court did issue an announcement (“Announcement”) in which it stated, in relevant part, as follows:

It is appropriate for this court to clarify its practices regarding joint petitions, in light of the much-publicized Balas and Morales decision, …

The Balas and Morales decision is not binding in this court, because it is the decision of a court equal to this court, rather than a court superior to this court.  This court may properly address the issue raised in Balas and Morales only if and when that issue is properly presented in a case before this court.

The Announcement further provided that the clerks of the bankruptcy courts in the Northern District of California would accept for filing a single bankruptcy petition by individuals representing themselves as lawfully married, and further, that the court would not, on its own initiative an investigation as to whether any such individuals were same-sex, opposite-sex or recognized as married under state or federal law.  However, the Announcement also provided that if a motion or action was filed by a party in interest objecting to such a joint filing, that the court would schedule such proceedings as are appropriate to determine the legal and factual questions raised in the action or motion.

Marlene G. Weinstein is a sole practitioner whose practice is devoted exclusively to Bankruptcy Law representing debtors, creditors and Chapter 7 trustees. She believes pre-bankruptcy planning is important and that it can often be used as an effective tool in negotiations between parties involved in non-bankruptcy disputes. She often works with clients in conjunction with tax, litigation, family law and other non-bankruptcy attorneys. Her office is in Walnut Creek. She can be reached at 925-472-0800.

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