In June, the first gay married couple filed for joint bankruptcy in Kentucky. While Kentucky doesn't recognize gay marriage, the couple had tied the knot in New York. A federal bankruptcy judge confirmed their reorganization plan in July. The couple saved $306 by not having to pay for a second filing fee.
The Obama administration has decided to not contest joint filings by gay couples any longer. In the words of the Kentucky couple, "We have been together for 16 years, and our money is our money and our debts are our debts." They also went on to say, "We live here and pay taxes here. It is nice to know we have the same rights as other Americans." Other individuals within the state are having a hard time accepting the situation, however.
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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 very 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 pointed out in a joint bankruptcy filing that a same sex couple was trying to set a federal standard for 'spouse' when Congress had not set one. As a result, it ruled that the state's definition would be upheld. The Obama administration has hinted that it is okay for gay couples to file for joint bankruptcy if they live in a state that has legalized gay marriage (section 302 of the Bankruptcy Code would define 'spouse' based on state law)- but this step was huge for Kentucky, a state that has not legalized gay marriage. Same-sex couples have brought up the Full Faith and Credit Clause of the Constitution for justification.
It was also a huge step considering the lesbian couple, Lee and Ann Kandu (Washington residents), who filed for joint bankruptcy in 2003 but were denied it. Lee Kandu filed for Chapter 7 bankruptcy when she learned her partner; Ann's cancer was back and had spread. The presiding judge at the time declared, "There is no basis for this court to unilaterally determine 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 petition for bankruptcy can be helpful as it saves administrative costs, attorney fees and can promote harmony. Furthermore, it is also a very efficient step as the amount of work that has to be done is half as much. Joint bankruptcy gives a couple the best protection for joint debts (such as mortgage loans, vehicle loans and credit card debts).
If most of your's and your spouse's debts are jointly held between the two of you, it might be best to consider filing a joint petition. Or even if the debts aren't joint, but both spouses are responsible for the majority of the debts-it might be best to file a joint petition. The fact is that a joint petition saves time, trouble and money.
Before filing for a joint petition, however, a couple should seek a qualified bankruptcy attorney who can advise them about the advantages/disadvantages of a joint bankruptcy. If only one spouse is primarily responsible for the debt incurred and the other has a good credit record, it might be better to file an individual petition. An attorney can help you determine whether it is better to file separately or jointly, if your property will be affected, and how your spouse's bankruptcy could affect you if your finances are separate.
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