The U.S. Bankruptcy Court for the Central District of California denied a motion to dismiss a joint bankruptcy petition filed by a same-sex couple. The court found that the Defense of Marriage Act (DOMA) was unconstitutional as it violated the Fifth Amendment's due process clause. Since the couple's marriage was valid under California law at the time, the court ruled they had the same rights as other legally married couples to file jointly. This decision sets precedent that same-sex couples have equal rights in bankruptcy proceedings.

1. BANKRUPTCY COURT WEIGHS IN ON SAME-SEX MARRIAGE
The U.S. Bankruptcy Court for the Central District of California recently denied a
motion to dismiss a joint Chapter 13 petition of a same-sex couple in In Re Balas and
Morales, 449 B.R. 567 (Bkrtcy. C.D. Cal. 2011) holding that the Defense of Marriage
Act ("DOMA") was unconstitutional, violating the due-process clause of the Fifth
Amendment.
BACKGROUND
On February 24, 2011, Gene Balas and Carlos Morales ("Debtors") filed a joint
Chapter 13 bankruptcy. The United States Trustee moved to dismiss the case under
Section 1307(c) of the Bankruptcy Code, claiming that the Debtors were ineligible,
because the Debtors were two males, and thus was in violation of Section 302 and the
definition of spouse as defined in DOMA. The Debtors, however, were legally married in
California August 20, 2008 (prior to the enactment of California Proposition 8 – limiting
marriage to a woman and a man). The matter was decided on June 13, 2011, by Judge
Thomas Donovan and signed by 19 other California bankruptcy judges ruling in favor of
the Debtors.
DISCUSSION
Judge Donovan's analysis of this case relies heavily on the assumption that the
marriage of Balas and Morales was legal and valid. Since the marriage was finalized
before Proposition 8 went into effect, the Debtors' marriage was recognized based on the
passage of California Senate Bill 54, a bill that went into effect in January 2010
legalizing all same-sex marriages performed prior to Proposition 8. In addition, the Court
cited favorably the Obama Administration's position as stated in a letter from U.S.
Attorney General Eric H. Holder, Jr. to Speaker of the House of Representatives John
Boehner, dated February 23, 2011 that DOMA was unconstitutional.
Given that the Debtor's marriage was legal and valid, Judge Donovan framed the
issue as whether or not legally married same-sex couples have the same rights as other
legally married couples. He noted that the eleven causes for dismissal listed in Section
1307(c) do not apply to this case, and that the only issue arises with the term "spouse" in
Section 302(a).
Judge Donovan found that the U.S. Trustee's cited cases of In re Jephunneh
Lawrence & Assoc. Chartered, 63 B.R. 318 (Bkrtcy. D.C. 1986, (joint petition was
improperly filed by a corporation and its sole shareholder) and In Re Malone, 50 B.R. 2
(Bkrtcy. E.D. Mich 1985) (two unmarried, cohabitating people were not entitled to file a
joint petition) were inapplicable to the case at bar. However, two cases that were relevant
were In re Somers, 448 B.R. 677 Bkrtcy. S.D.N.Y. 2011 (insufficient grounds to dismiss
a joint petition based on the "only for cause" provision of Section 707(a)) and In re
Ziviello-Howell, 2011 WL 2144417 (Bkrtcy. E.D.Cal. 2011), (no cause for discretionary
dismissal under Section 707(a) for two married women filing a joint petition). Judge

2. Donovan's opinion then proceeds to provide extended analysis for challenging DOMA's
constitutionality citing favorably the heightened scrutiny test contained in Witt v. Dep't of
Air Force, 527 F.3d 806 (9th Cir. 2008) claiming that "the question the court must focus
on is whether dismissing the Debtors' bankruptcy case pursuant to DOMA 'advances an
important governmental interest.'" Judge Donovan holds that it does not and then finally
refers to the history of discrimination against homosexuals, and states that permitting the
Debtors' joint bankruptcy petition will not interfere with DOMA's goals, i.e. to encourage
responsible child-bearing, defending the traditional institution of heterosexual marriage,
defending traditional notions of morality, and preserving limited governmental resources.
COMMENT
Since the Bales and Morales opinion was decided, the U.S. Trustee has
withdrawn its appeal, so the decision is only legally binding in the Central District.
However, other courts appear ready to follow the results of Bales and Morales. For
example, the U.S. Bankruptcy Court for the Northern District of California recently
announced on its website that although the Balas and Morales decision is not binding in
its court, joint petitions will be accepted by the clerk by two individuals who represent
that they are lawfully married and the court will not on its own initiative investigate
whether the married couple is same-sex or mixed-sex are in fact legally married. Counsel
representing debtors or creditors should review and update their local court's practice on
this issue.
By Heather Hildreth, Candidate for B.S. Physics and B.A. French at the University of Virginia
2013; Jaclyn Morrison, Candidate for B.A. Sociology and French at the University of Western
Ontario 2012; and Peter Califano, Esq. Cooper, White & Cooper LLP