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Joint Bankruptcy Cases Now Legal for Married Same Sex Couples

Today in Obergefell v. Hodges, 14-556 (2015), the U.S. Supreme Court, in a 5 to 4 decision, ruled that marriage is fundamental right for same sex couples. Under the Due Process and Equal Protection Clauses of the Fourteenth Amendment, same-sex couples may not be deprived of the right to marry. Any state laws that deny the right of same sex couples to marry on the same terms and conditions as opposite-sex couples are invalid.

This decision will have a significant impact on the ability of same sex couples to file for bankruptcy relief. Bankruptcy Code § 302 provides that a joint bankruptcy case can only be commenced by filing a single petition by an individual and such individual’s “spouse.” Before today, most courts held that same sex couples did not qualify to file joint cases because they were not “spouses.” Joint bankruptcy cases were prohibited in states that did not recognize same sex marriages, including Texas. Same sex couples that desired to file for bankruptcy protection would need to file separate bankruptcy petitions.

This was especially problematic in Chapter 13 bankruptcy cases. In a Chapter 13 case, married couples will typically file a joint bankruptcy case to propose a joint payment plan to deal all of the debt owed by both spouses. This is an efficient way to propose a plan to deal with the repayment of unsecured debt such as credit cards, medical bills, pay day loans and other unsecured (non-collateralized) debts. It provides the spouses with a joint strategy and goal of repaying between 0% and 100% of the debt jointly owed by them. The amount that must be paid toward unsecured debts in a Chapter 13 plan depends on the joint household income and the ability of the family to pay. The higher the household income, the more that must be paid. At the end of the repayment plan, both spouses obtain a fresh start free of debt, the process might take a while so the sooner you start the better.

Before today, married couples could only file separate bankruptcy cases. Separate Chapter 13 cases filed by spouses are cumbersome, complicated and much more costly. It requires the payment of two separate legal fees, two filing fees, and the filing of two separate bankruptcy plans. The separate plans can often have conflicting goals and objectives, and are difficult to coordinate. These types of cases are rarely completed successfully.

These problems should now be history for same sex couples. An immediate result of the Hodges decision will be that married same sex couples will now be considered “spouses” and will be permitted to file a joint bankruptcy case.