DOMA and Bankruptcy

DOMA and Bankruptcy

| Jul 5, 2013 | Bankruptcy |


The Supreme Court just struck down the federal Defense of Marriage Act (DOMA) in the case of United States v. Windsor
. The end of DOMA marks a turning point in how the United States government treats the relationships of married same-sex couples for federal programs and laws that are linked to being married, including bankruptcy laws. In Maryland, for example, where same sex marriage is recognized, a same sex married couple should now be able to file a joint case. This means the couple can save money as they only need to pay one filing fee. They should also save money on legal fees because the attorney only needs to file one case for both parties. Both spouses will be able to use Maryland’s exemptions, including the powerful tenants by the entireties exemption.

While same sex couples who live in a state that does not respect their marriage (the couple got married in a state that allowed them to get married and they then moved to a state that does not recognize the marriage) may be able to file a joint bankruptcy case, it is not clear that what exemptions they will be able to use, as exemptions are based on state law. The Supreme Court’s ruling in Windsor applies only to the federal government, which is why it applies in bankruptcy cases as bankruptcy courts are federal courts and the law, with the exception of exemptions, is based on federal law. The ruling does not change state laws excluding same-sex couples from state-conferred marriage rights.

There is no federal statute or regulation that addresses how the bankruptcy courts are to determine whether a marriage is valid. A same sex couple may be recognized as married for bankruptcy purposes, and depending on when they moved, the law of their former home state might apply to determine their exemptions. It may take some time for the bankruptcy courts to sort out how they will handle joint filings by married couples in states that do not respect marriages of same-sex couples.

The ruling striking down DOMA will become effective 25 days from the date of the decision. Even when effective, federal courts and other federal agencies may need and take some time to change forms, implement procedures, train personnel, and efficiently incorporate same-sex couples into the spousal-based system.