A New York bankruptcy court ruled that a same sex married couple can file a joint bankruptcy case, just the same as a heterosexual married couple, regardless of the existence of the federal Defense of Marriage Act. This case, In re Somers and Caggiano, No. 10-38296 (Bky.S.D.N.Y. May 4, 2011), and the rulings in In re Balas and Morales, No. 2:11-bk-17831 (Bky.C.D.Cal, June 13, 2011), and In re Ziviello-Howell, No. 11-22706 (Bky.E.D.Cal. May 31, 2011), are the first instances where U.S. bankruptcy courts have approved the filing of joint bankruptcy petitions by same sex married couples.
The bankruptcy court in In re Somers and Caggiano turned aside a motion by the U.S. Trustee to dismiss the joint chapter 7 filing by the debtors, who had been legally married in Vermont in 2010. The U.S. Trustee pointed out that although section 302(a) of the bankruptcy code allows a joint bankruptcy case to be filed by debtors who are legally married, the Defense of Marriage Act, 1 U.S.C. section 7, defines a married couple as consisting only of opposite sex married couples.
The court was not persuaded by the U.S. Trustee”s argument that the Defense of Marriage Act mandated dismissal of the case. It noted that the U.S. Attorney General had announced in a letter dated February 23, 2011, sent to House Speaker John Boehner, that the Justice Department would cease defending the Defense of Marriage Act in federal court proceedings, due to concerns about DOMA”s constitutionality.
The court also noted that the U.S. Trustee had not argued the issue of DOMA”s constitutionality in its brief to the court. The U.S. Trustee had merely quoted the language of DOMA. The court found that “the mere existence of DOMA is not sufficient to remove the duty imposed on this Court” to find “cause” under section 707(a) of the bankruptcy code before dismissing a case under that section.
The court found that the U.S. Trustee had not met its burden of proving that dismissal would be in the best interests of the debtors or their creditors. There were no allegations of bad faith, hidden assets, “stalling” or other bad faith on the part of the debtors. Additionally, if the pending joint bankruptcy case were severed, the chapter 7 trustee would have to administer a “single pool of assets for a single pool of creditors over two cases.” This would be inconvenient and pointless.
The New York bankruptcy court”s refusal to dismiss this same sex joint bankruptcy case has been viewed as good news by those advocating for equal treatment in federal bankruptcy courts for married same sex couples. However, as noted by Virginia bankruptcy attorney Dan Press in a recent Bankruptcy Law Network article, due to the vagaries of the bankruptcy law”s means test, same sex couples are usually better off filing separate bankruptcy cases rather than joint cases, on the theory that DOMA prevents them from filing joint cases even if they are legally married.