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Same-Sex Couple Deemed “Spouses” for Purposes of the Bankruptcy Code

By: Michael Rich

St John’s Law Student

American Bankruptcy Institute Law Review Staff

 

Recently, in In Re Matson,[1] the court held that a same-sex couple who filed for bankruptcy as joint debtors were “spouses” for the purpose of the Bankruptcy Code even though the petition was filed in a state that did not recognize their same-sex marriage.[2]  In Matson, the debtors were legally married in Iowa but resided in Wisconsin, which does not recognize same-sex marriages.[3]  Upon the filing of the case, a creditor moved to dismiss the bankruptcy case or, in the alternative, to bifurcate the case.[4]  The creditor argued that a joint bankruptcy case could only be commenced “by an individual that may be a debtor under such chapters and such individual’s spouse.”[5]  Further, the creditor claimed that “the definition of marriage and the regulation of marriage . . . has been treated as being within the authority and realm of the separate States.”[6]  Thus, the creditor argued that since Wisconsin did not permit or recognize same sex marriages, the debtors should not be deemed “spouses” for the purpose of a joint bankruptcy petition.[7]  In the response, the debtors relied on the Supreme Court’s holding that the federal Defense of Marriage Act, which defined marriage as a union between one man and one women, was unconstitutional because it “violate[d] basic due process and equal protection principles applicable to the Federal Government.”[8]  In particular, the debtors argued that following Windsor,[9] the definition of marriage could no longer be restricted to “a union between one man and one woman.”[10]  Therefore, the debtors claimed that Wisconsin did not have the authority to deny a lawfully wedded couple any federal benefits, which would include same-sex couples right to file as spouses in a joint bankruptcy case.[11]  Ultimately, the Matson court denied the creditor’s motion to dismiss or, in the alternative, bifurcate the case because the court found that it was required to give full faith and credit to the Iowa marriage.[12]

While section 302 of the Bankruptcy Code permits an individual and such individual’s spouse to commence a joint case by filing a single bankruptcy petition, it is not clear whether same-sex couples should be deemed “spouses” for the purposes of the Bankruptcy Code.[13]  After United States v. Windsor,[14] the definition of marriage was no longer restricted to a “legal union between one man and one woman only” for the purposes of federal law.[15]  That decision, however, did not invalidate section 2 of DOMA, 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.”[16]  Regardless of Wisconsin’s State Constitution or the Windsor[17] decision, the Matson court found that needed to answer a choice of law question in order to render a decision, because Section 2 of DOMA applies to states, not the bankruptcy court, or any other federal court.[18]  Although the Bankruptcy Code is silent as to which state law to apply when determining validity of a marriage, the Matson court noted that it was well settled that the law of the place where the marriage is celebrated governs the validity of a marriage.[19]  Moreover, the Matson court noted that reliance on a “place of celebration” rule ensures that married couples do not lose their marital status simply because they travel or relocate across state borders.[20]  Further, the Matson court stated that “[t]his recognition continues even in states where the marriage could not have originally been performed.[21]  Accordingly, the Matson court followed the “place of celebration” rule, which dictated that the debtor’s marriage was valid under Iowa law.[22]  Therefore, since the Matson court concluded that it was required to give full faith and credit to Iowa marriage when interpreting the Bankruptcy Code, the court held that the debtors were “spouses” who were entitled to file a joint petition notwithstanding the Wisconsin same-sex marriage ban.[23]

In re Matson has significant implications as more and more states continue to recognize same-sex marriage, a same-sex couple who were legally married in a state that permits same-sex marriage will be deemed “spouses” even if they reside in a state that does not recognize same-sex marriage.  The immediate benefits are evident around the Country, as same-sex couples will be able to file joint petitions regardless of where they live.  Consequently, couples will be able to avoid incurring twice the costs if they wish to file for bankruptcy because they will be able to file one petition instead of two.  This is quite beneficial to couples who are already struggling financially because they will not have to pay for two cases.  Significantly, the In re Matson decision allows same-sex couples to reorganize their finances as a couple.  Lastly, the ruling ensures both debtors will appear in front of the same judge, providing consistency throughout the bankruptcy process.  Ultimately, however, In re Matson’s significance may be short lived because the Supreme Court will determine whether state prohibitions against same-sex marriage are unconstitutional later this year.[24]  If the Supreme Court strikes down same-sex marriage bans, the issue in In re Matson will no longer arise since same-sex marriages will be legal everywhere in the United States.

 

 



[1] In re Matson, 509 B.R. 860, 864 (Bankr. E.D. Wis. 2014).

[2] Id. at 864.

[3] Id. at 861.

[4] Id. at 861.

[5] 11 U.S.C. 302(a) (2012) (emphasis in original)

[6] In re Matson, 509 B.R. at 861 (quoting United States v. Windsor, 133 S. Ct. 2675, 2689–90 (2013)).

[7] Wis. Const. art. XII. § 13 (“Only a marriage between one man and one woman shall be valid or recognized as a marriage in this state. A legal status identical or substantially similar to that of marriage for unmarried individuals shall not be valid or recognized in this state.”)

[8] Windsor, 133 S. Ct. at 2693.

[9] Id.

[10] In re Matson, 509 B.R. at 861.

[11] See id.

[12] Id. at 864.

[13] 11 U.S.C. § 302(a).

[14] Windsor, 133 S. Ct. 2675.

[15] See id. at 2683.

[16] See In re Matson, 509 B.R. at 862; see also 28 U.S.C. § 1738(c) (2012).

[17] Windsor, 133 S. Ct. at 2675.

[18] In re Matson, 509 B.R. at 863.

[19] J.M.H. & G.H.P., Annotation, Effect in Third State of Marriage Valid Where Celebrated But Void by Law of Domicil of Parties, 51 A.L.R. 1412 (1927).

[20] In re Matson, 509 B.R. at 863–4 (“This recognition continues even in states where the marriage could not have been originally performed.”).

[21] Id. at 864; see also Restatement (First) of Conflicts of Law § 121 (1934) (stating, marriage deemed “valid everywhere” if the “requirements of the marriage law of the state where the contract of marriage occurred was satisfied.”).

[22] See In re Matson, 509 B.R. at 864.

[23] See id.

[24] See DeBoer v. Snyder, 772 F.3d 388, cert. granted, 135 S. Ct. 1040 (2015).