Recent Bankruptcy Cases Reject DOMA Objection to Same-Sex Petition
In February, the Department of Justice announced its decision to not enforce Section 3 of the Defense of Marriage Act (“DOMA”), which bars the federal government from recognizing same-sex couples as married. The President concluded that this section is unconstitutional and ordered the Department to halt its defense of DOMA. This policy has caused confusion even in bankruptcy court, where the policy prescribed in DOMA, which is still technically good law, conflicts with the Department of Justice’s announcement.
In a decision made on May 4, 2011, New York Bankruptcy Judge Cecelia Morris rejected a motion to dismiss a joint bankruptcy filing made by a same-sex couple. In the case, a long term same-sex couple made a joint filing for bankruptcy in New York, after marrying in Vermont, where same-sex marriages are legal. In response to the petition, the trustee informed the couple that DOMA requires the federal government not to recognize their marriage, and that he would object to the filing. The debtors filed a motion to sever their joint case, but then the announcement came from the Department of Justice that the law was unconstitutional, and the debtors moved to withdraw their motion to sever the case and to once again remain as a joint filing. The filing was challenged by the trustee.
In deciding the case, Judge Morris avoided ruling on the constitutionality of DOMA. The court held that the debtors were legally married, and that the court had broad discretion to determine whether or not to dismiss a petition under Bankruptcy Code § 707(a). As a matter of discretion, the court found that the Department’s announcement on DOMA was an extenuating circumstance which made DOMA a less compelling ground for dismissal of a bankruptcy case.
Subsequently, on May 31, 2011, a California bankruptcy court has followed Judge Morris’s lead. Reasoning that a dismissal would cost the debtors and the courts money as well as time, Judge McManus held that dismissal would not be in the best interest of the parties. Further, the court reasoned that DOMA did not absolutely compel the court to dismiss the case even if it were certainly constitutional, which it is not.
At this point, bankruptcy courts appear to be refusing to dismiss a joint filing by a same-sex couple in growing numbers. This California decision will be strong precedence in the 9th Circuit, which includes Arizona, but only time will tell what ultimately becomes of DOMA and joint filings by same-sex couples.
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