In June 2013, the U.S. Supreme Court struck down Section 3 of the Defense of Marriage Act (DOMA) as unconstitutional in United States v. Windsor. Section 3 defined “marriage” in federal law as “a legal union between one man and one woman as husband and wife.” DOMA required the Bankruptcy Code to deny same-sex married couples the benefits it gave to opposite-sex married couples, which was a problem for state residents before New York legalized same-sex marriage in 2011. Between 2011 and Windsor, it was a problem for couples who were legally married in New York but moved to a state that didn’t recognize their marriages. That didn’t mean DOMA was always enforced in bankruptcy proceedings. For example, in May 2011, just before same-sex marriage was legalized in New York, a bankruptcy judge refused to sever a Vermont-married same-sex couple’s case because it would increase the costs of the bankruptcy for all parties.
In February the Department of Justice announced its subdivisions would comply with the ruling in Windsor. In particular, the U.S. Trustee Program (USTP), which monitors the bankruptcy system and helps investigate bankruptcy fraud cases, issued guidelines related to same-sex marriage in bankruptcy to its personnel. Here are the most important interpretations the USTP has adopted.
- Same-sex married New Yorkers should now be able to avail themselves of bankruptcy protection jointly just as opposite-sex couples can.
- Similarly, if a same-sex married couple is divorced, any debt created by a separation agreement or divorce decree should be nondischargeable. The same goes for domestic support obligations.
- Same-sex married partners should now be considered “insiders” in preference actions on the basis of family relationship.
- Same-sex couples who are validly married in New York State and move to a state that does not recognize their marriages should still be treated as married for the purpose of filing bankruptcy.
- According to the USTP’s Frequently Asked Questions page, “state” has a broad meaning. It includes, “any state of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, American Samoa, Guam, Wake Island, the Northern Mariana Islands, any other territory or possession of the United States, and any foreign jurisdiction having the legal authority to sanction marriages.”
- Couples who are in civil unions, domestic partnerships, or marriages that are not recognized in the United States will not be considered marriages by the U.S. Trustee Program under the Bankruptcy Code.
- Importantly, the U.S. Trustee Program notes that it is not “the sole regulatory authority with respect to bankruptcy law and procedure.” Other participants in a bankruptcy proceeding might not share the Justice Department’s and the USTP’s interpretation.
Although the ruling in Windsor didn’t really change anything for New Yorkers, it will definitely benefit same-sex couples who marry in New York but move to a state that doesn’t recognize their marriage. The USTP’s new interpretations will ensure that it will treat same-sex couples in New York equally.
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