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Gay Married Couples May Now (Apparently) File Bankruptcy Jointly

Aug. 19, 2011

In June, a bankruptcy court in Los Angeles emphatically declared that a legally married gay couple could file their bankruptcy case jointly, even if doing so was in direct violation of the controversial federal Defense of Marriage Act (“DOMA”).

The Bankruptcy Code allows a “joint case” to be filed by “an individual . . . and such individual’s spouse.” DOMA defines the term “spouse” as “a person of the opposite sex who is a husband or a wife.” thus disallowing same-sex person to be a “spouse.” However, the bankruptcy court determined that DOMA was unconstitutional because “no legally married couple should be entitled to fewer bankruptcy rights than any other legally married couple. “ Under their constitutionally derived equal protection rights, the legally married gay debtors were entitled to be treated the same as married heterosexuals because preventing them from doing so advanced no “important governmental interest.”

A single bankruptcy court opinion such as this one usually has a limited effect—it is only legally binding on bankruptcies filed within that federal district. Granted, the bankruptcy court in that Southern California federal district has more consumer bankruptcy cases filed each year than in any of the other 93 federal districts in the country. But still, this same issue was being simultaneously fought out in bankruptcy courts in other parts of the country, with the definite possibility that other bankruptcy judges could have reached opposite results. So normally it would be years before a definite answer came out of the appeals process, perhaps even needing an eventual decision by the U. S. Supreme Court.

But because of an extremely unusual combination of legal and political events, this one bankruptcy court’s opinion IS for practical purposes the law of the land. How could that be?

  1. The opinion of the bankruptcy court, which is virtually always signed by a single bankruptcy judge, was also signed by 19 other bankruptcy judges, presumably all from that bankruptcy court (where they have many more judges than usual because the huge population and the number of bankruptcy filings). This is an almost unheard of emphatic showing of support for a judge’s decision by his local colleagues.

  2. The federal government, through the U.S. Trustee, filed an appeal of the bankruptcy court’s opinion in late June. But then shortly after, in early July, the U.S. Trustee cancelled that appeal. It did so because earlier in the year, President Obama had announced that his Administration would not enforce DOMA, for the same reason as the Los Angeles bankruptcy judge, that it was unconstitutional. In this unusual situation the U.S. House of Representatives had the option of enforcing the law, and in this very case it had signaled that it would do so. But then the House changed its mind and informed the U.S. Trustee that it would not try to enforce DOMA in this context of joint-filed bankruptcies.

  3. As a result, not only did the U.S. Trustee dismiss its appeal in the California bankruptcy court case, it immediately also stopped fighting the issue in other bankruptcy courts throughout the country.

So it sounds like this one bankruptcy court opinion allowing legally married gay couples to file bankruptcy jointly is functionally the law throughout the country. That’s even though the Los Angeles opinion was never reviewed or decided by a higher court, nor were any other bankruptcy court opinions. Technically, that opinion’s ruling is legally binding only for the bankruptcies filed in the seven counties in that federal district. But practically, its ruling is applicable everywhere. Unless the House of Representatives changes its mind. Or if some bankruptcy judge raises an objection even without the U.S. Trustee doing so.