In a 5-to-4 decision in United States v. Windsor, the U.S. Supreme Court ruled today that married same-sex couples are now entitled to receive federal spousal benefits in the states in which they are legally married. The landmark ruling overturns a portion of the Defense of Marriage Act (DOMA) from 1996 which denies federal benefits to legally married same-sex couples despite the recognition of those marriages under state law.
What this historic decision practically means is that same-sex couples in the 14 states/districts where same-sex marriage is legal can now enjoy the numerous benefits bestowed by federal law on married couples, including a lower tax rate on their married-filing-joint federal income tax returns, spousal tax exclusions on transfers of funds and assets, other estate tax benefits, social security survivor benefits, federal health care protections extended to married couples such as COBRA coverage and Medicare’s spousal benefits, spouse-based sponsorship for U.S. citizenship, the ability to file joint bankruptcy petitions, and many more.
When it comes to bankruptcy, all married couples in these 14 states (including Minnesota) can now file joint bankruptcy petitions at least in a state which recognizes their legal marriage. The benefit to filing a joint bankruptcy case rather than two individual bankruptcies is that a same-sex couple will not needlessly pay two filing fees (currently $306 per Chapter 7 case) nor will they have to pay two attorney fees (usually charged at a flat rate). Instead, a joint bankruptcy filing requires the payment of just one filing fee and typically only a small upcharge on the attorney fee, thereby saving the couple up to $2,000 or more on their joint Chapter 7 bankruptcy case. In addition to savings, a joint bankruptcy filing can also utilize the protections of two sets of exemptions rather than jut one, potentially protecting a greater amount of valuable assets from possible liquidation in Chapter 7.
As of the date of this posting, the 14 states that recognize same-sex marriage include California, Connecticut, Delaware, District of Columbia, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont and Washington. California was welcomed to this list thanks to the Supreme Court’s same-day decision knocking down California’s Proposition 8 in a separate ruling.
The question is still unanswered as to whether same-sex couples legally married in one state can file a joint bankruptcy petition if they now reside in one of the other states which do not recognize same-sex marriage.
Lynn Wartchow is graduate of Carleton College and a bankruptcy attorney located in Edina, Minnesota representing all couples in Chapter 7 and Chapter 13 consumer bankruptcy proceedings throughout the Twin Cities area of Minneapolis and St. Paul, Minnesota.