Same-Sex Couple May File as Joint Debtors

Posted by NCBRC - May 22, 2014

The debtors, a same-sex couple, were legally married in Iowa but lived and filed for chapter 13 bankruptcy as joint debtors in Wisconsin. Creditor, Seaway Bank, moved to dismiss or, in the alternative, to bifurcate the bankruptcy petition. Finding that a federal bankruptcy court must recognize the validity of a marriage that was legal in the state in which it took place, the court denied Seaway’s motion. In re Matson, No. 13-35361 (Bankr. E.D. Wisc. Apr. 29, 2014).

Section 302(a) provides that a joint case may be commenced by “an individual that may be a debtor under such chapter and such individual’s spouse.” Seaway argued that marriage is traditionally a matter of state law and Wisconsin’s Constitution defines marriage as “between one man and one woman,” and prohibits same-sex couples from entering into a “legal status identical or substantially similar to that of marriage.” Wis. Const. Art. XIII, § 13. Therefore, the debtors could not be “spouses” for purposes of filing a joint bankruptcy case in Wisconsin.

The court began with a discussion of the impact of the recent finding by the Supreme Court that certain provisions in the Defense of Marriage Act violated the federal constitutional rights of same-sex couples. United States v. Windsor, 133 S. Ct. 2675, 2689-90,186 L. Ed. 2d 808 (2013). Windsor involved application of federal estate tax laws to a same-sex couple married in Canada and living in New York, where their marriage was recognized as valid. In DOMA’s “Dictionary Act,” 1 U.S.C. § 7, marriage is defined as between a man and a woman for all federal purposes. The Supreme Court, noting that the provision would extend to over 1,000 federal statutes including bankruptcy, found the provision was a violation of the Equal Protection Clause of the Constitution. 133 S. Ct. at 2693. Where states govern the definition of marriage, the Windsor Court found that the federal government could not legitimately deprive same-sex couples of benefits that the states had chosen to permit. The Windsor Court left open the validity of DOMA’s section 2 which creates an exception to the Full Faith and Credit Act and provides that no state shall be required to give effect to “any public act, record, or judicial proceeding respecting a relationship between persons of the same sex.”

In Matson, the court found that while section 2 of DOMA applied to action by the state of Wisconsin, it did not control action by the federal bankruptcy court located in Wisconsin. Because the Bankruptcy Code is silent as to which state law to apply when determining the validity of a marriage, the court addressed the issue as one of choice of law, adopting the “place of celebration” as the proper arbiter of validity. Citing See, e.g., H.R. Rep. No. 104-664, at 8 (1996) (noting “[t]he general rule for determining the validity of a marriage is lex celebrationis – that is, a marriage is valid if it is valid according to the law of the place where it was celebrated”); I.R.S. Rev. Rul. 2013-17, 2013-38 I.R.B. 201 (“the Service has determined to interpret the Code as incorporating a general rule, for Federal tax purposes, that recognizes the validity of a same-sex marriage that was valid in the state where it was entered into, regardless of the married couple’s place of domicile”). Under this rule a married couple does not lose its marital status merely by reason of traveling outside the state where they were married. Thus, even though currently states are not required to give effect to other state’s marriage laws, the court found that, under the Full Faith and Credit Act, 28 U.S.C. § 1738, federal bankruptcy courts must recognize the validity of the debtors’ marriage. The court concluded that, “the state of Wisconsin does not have the authority to deny a lawfully wedded couple any federal benefits, which would include the right to file as spouses in a joint bankruptcy case.”

The court noted: “Neither the United States Trustee nor the Chapter 13 Trustee have joined the motion, presumably because the Department of Justice announced that ‘same-sex married couples should be treated in the same manner as opposite-sex married couples for all bankruptcy purposes …including individuals married to a person of the same sex who were legally married in a state that recognizes such marriages, but who are domiciled in a state that does not recognize such marriages.’ U.S. Dept. of Just., U.S. Trustee Program, Consumer Info., (last visited April 23, 2014).”

Matson opinion


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