In June the United States Supreme Court struck down the federal law commonly known as the Defense of Marriage Act (DOMA) in US v. Windsor. The ramifications of that court decision are widespread. In the bankruptcy field, the ruling seems clear. If you are married under Massachusetts state law you now can file bankruptcy jointly in federal Bankruptcy Court.
Windsor was a woman who was married in Canada. New York state acknowledged the marriage; however, when her wife died and she filed for probate, the IRS denied her the federal tax exemption for a spouse because of DOMA.
Will this result in all same sex married couples being able to file for bankruptcy?
Marital Bankruptcy in Massachusetts
In Massachusetts a married couple can file for bankruptcy together. This helps many folks because the costs of filing for bankruptcy include filing fees, currently at $306, and attorney fees, which can be significant. Especially if you have to pay twice!
Just so it is clear, many married couples do not file jointly. Why? Frequently, most of the dischargeable debt is in only one name so we file for that spouse. But that is a decision based on the situation personal to that family.
It is our position that post Windsor a same sex married couple can file for bankruptcy together in Massachusetts. Our opinion is based on two levels of reasoning. First, Massachusetts state law allows for same sex marriage. If, like many states, this was not yet permitted, we would not be able to get to the second level. That is, under Windsor, same sex couples can be married: they can file taxes together, they can benefit from inheritance laws, and they can enjoy any and all of the federal benefits, and obligations.
Does Filing Bankruptcy Together Add Rights for Same Sex Couples?
Yes. In addition to the aforementioned saving of filing and legal fees, same sex couples can now benefit from joint bankruptcy exemptions. This is particularly true in the area of real estate and the homestead exemption.
If you are married, same sex or not, you can jointly own a home as “tenants by the entirety” which means that if either one dies, the other spouse gets the home without any probate, or court filings. There is no tax consequence either. Now, jointly owning a home offers the same type of protection for a bankruptcy. Both spouses can own the home and get the $500,000 Massachusetts Homestead Act exclusion. The exempt amount goes up to one million dollars if you are both over 62. Furthermore, if a spouse is disabled, this could apply to a spouse under 62.
Additionally, same sex couples now have additional rights in foreclosure and creditor actions.
What Should A Same Sex Couple Do If Contemplating Bankruptcy?
Call an experienced bankruptcy lawyer. We have represented folks filing for federal bankruptcy in Massachusetts for 28 years. While the feds forced a challenge for same sex couples, the door is now open to all married couples.
Bankruptcy often involves planning. Planning for a same sex couple now is the same as planning for everyone else. Planning is critical. Call an experienced bankruptcy lawyer and get the “fresh start” that the law contemplates, for everyone.
