12 February 2014

Same-Sex Couples in Bankruptcy

I cannot imagine anyone is not aware of AG Holder's announcement that beginning Monday the US Department of Justice will "give [state] lawful same-sex marriages sweeping equal protection under the law in every program it administers." I will leave to others questions of constitutionality, the Federal Rules of Evidence, and the like. My singular question relates to the implications of the DOJ's position with respect to bankruptcy.

The WaPo's article states that same-sex couples will be able to file joint petitions in bankruptcy even in states that don't recognize them as married. This will presumably include a state like Virginia that recognizes a significant exemption for married couples, tenancy by the entirety.

Virginia property law generally makes real estate owned by a married couple exempt from debt incurred by either spouse individually. Such ownership--tenancy by the entirety--represents a great resource for married couples who own real estate. They can keep that property, typically but not necessarily a home, notwithstanding having to surrender other assets to the bankruptcy trustee.

Yet there is no way same-sex pairs whose union has been recognized in another state but who subsequently move to Virginia will can avail themselves of a a Virginia property law exemption. Moreover, the Attorney General cannot change the law, At most he could instruct the Office of the United States Trustee not to object to a a joint petition filed by a same-sex couple; this would not, however, block a private creditor from raising the same objection even in a state that does recognize same-sex marriage.

Perhaps I'm over-generalizing from this single example but it strikes me that the Attorney General's announcement is little more than a publicity stunt and an "in-your-face" gesture to those who in good faith disagree with the Administration's position on the issue.

No comments:

Post a Comment