Some states allow same-sex couples to file joint bankruptcy
In June, the first married gay couple filed for joint bankruptcy in Kentucky. While Kentucky does not recognize gay marriage, the couple had been married in New York. A federal bankruptcy judge upheld its reorganization plan in July. The couple saved $306 by not having to pay a second filing fee.
The Obama administration has decided to no longer challenge joint filings by gay couples. In the words of the Kentucky couple, “we’ve been together for 16 years, and our money is our money and our debts are our debts.” They also said, “We live here and pay taxes here. It’s nice to know that we have the same rights as other Americans.” However, other people within the state are having a hard time coming to terms with the situation.
In the words of state representative Stan Lee, “for a bankruptcy trustee and judge to allow this to go forward in the Commonwealth of Kentucky is an affront to the citizens of this state who spoke so loudly in 2004 when they passed the marriage amendment [stating marriage is to be between a man and a woman].”
In 1995, in Georgia, a court noted in a joint bankruptcy filing that a same-sex couple was trying to set a federal standard for ‘spouse’ when Congress had not. As a result, it ruled that the definition of the state would stand. The Obama administration has hinted that it’s okay for gay couples to file joint bankruptcy if they live in a state that has legalized same-sex marriage (Bankruptcy Code section 302 would define ‘spouse’ under state law), but this step it was huge for Kentucky, a state that has not legalized gay marriage. Same-sex couples have cited the Constitution’s Full Faith and Credit Clause as justification.
It was also a big step considering the lesbian couple, Lee and Ann Kandu (residents of Washington), who filed for joint bankruptcy in 2003, but were denied. Lee Kandu filed for Chapter 7 bankruptcy when she found out about her partner; Ann’s cancer had returned and spread. The presiding judge at the time stated, “There is no basis for this court to find unilaterally at this time that there is a fundamental right to marry someone of the same sex.”
Why is a joint petition so desirable? A joint bankruptcy petition can be helpful as it saves administrative costs, attorney fees, and can promote harmony. In addition, it is also a very efficient step since the amount of work that needs to be done is half. Joint bankruptcy provides the couple with the best protection for joint debts (such as home loans, car loans, and credit card debt).
If the majority of your and your spouse’s debts are jointly held between the two of you, you may want to consider filing a joint petition. Or even if the debts are not joint, but both spouses are responsible for the majority of the debts, it would be best to file a joint petition. The fact is that a joint petition saves time, trouble and money.
However, before filing a joint petition, a couple should seek out a qualified bankruptcy attorney who can advise them on the advantages and disadvantages of a joint bankruptcy. If only one spouse is primarily responsible for the debt and the other has good credit, it would be best to file an individual petition. An attorney can help you determine whether it is better to file separately or jointly, whether your property will be affected, and how your spouse’s bankruptcy might affect you if your spouse’s finances are separate.