In Re Balas & Morales Case Analysis

BANKRUPTCY COURT WEIGHS IN ON SAME-SEX MARRIAGE The U.S. Bankruptcy Court for the Central District of California recently denied amotion to dismiss a joint Chapter 13 petition of a same-sex couple in In Re Balas andMorales, 449 B.R. 567 (Bkrtcy. C.D. Cal. 2011) holding that the Defense of MarriageAct ("DOMA") was unconstitutional, violating the due-process clause of the FifthAmendment.BACKGROUND On February 24, 2011, Gene Balas and Carlos Morales ("Debtors") filed a jointChapter 13 bankruptcy. The United States Trustee moved to dismiss the case underSection 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 thedefinition of spouse as defined in DOMA. The Debtors, however, were legally married inCalifornia August 20, 2008 (prior to the enactment of California Proposition 8 – limitingmarriage to a woman and a man). The matter was decided on June 13, 2011, by JudgeThomas Donovan and signed by 19 other California bankruptcy judges ruling in favor ofthe Debtors.DISCUSSION Judge Donovans analysis of this case relies heavily on the assumption that themarriage of Balas and Morales was legal and valid. Since the marriage was finalizedbefore Proposition 8 went into effect, the Debtors marriage was recognized based on thepassage of California Senate Bill 54, a bill that went into effect in January 2010legalizing all same-sex marriages performed prior to Proposition 8. In addition, the Courtcited favorably the Obama Administrations position as stated in a letter from U.S.Attorney General Eric H. Holder, Jr. to Speaker of the House of Representatives JohnBoehner, dated February 23, 2011 that DOMA was unconstitutional. Given that the Debtors marriage was legal and valid, Judge Donovan framed theissue as whether or not legally married same-sex couples have the same rights as otherlegally married couples. He noted that the eleven causes for dismissal listed in Section1307(c) do not apply to this case, and that the only issue arises with the term "spouse" inSection 302(a). Judge Donovan found that the U.S. Trustees cited cases of In re JephunnehLawrence & Assoc. Chartered, 63 B.R. 318 (Bkrtcy. D.C. 1986, (joint petition wasimproperly 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 ajoint petition) were inapplicable to the case at bar. However, two cases that were relevantwere In re Somers, 448 B.R. 677 Bkrtcy. S.D.N.Y. 2011 (insufficient grounds to dismissa joint petition based on the "only for cause" provision of Section 707(a)) and In reZiviello-Howell, 2011 WL 2144417 (Bkrtcy. E.D.Cal. 2011), (no cause for discretionarydismissal under Section 707(a) for two married women filing a joint petition). Judge

Donovans opinion then proceeds to provide extended analysis for challenging DOMAsconstitutionality citing favorably the heightened scrutiny test contained in Witt v. Dept ofAir Force, 527 F.3d 806 (9th Cir. 2008) claiming that "the question the court must focuson is whether dismissing the Debtors bankruptcy case pursuant to DOMA advances animportant governmental interest." Judge Donovan holds that it does not and then finallyrefers to the history of discrimination against homosexuals, and states that permitting theDebtors joint bankruptcy petition will not interfere with DOMAs goals, i.e. to encourageresponsible 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 haswithdrawn 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. Forexample, the U.S. Bankruptcy Court for the Northern District of California recentlyannounced on its website that although the Balas and Morales decision is not binding inits court, joint petitions will be accepted by the clerk by two individuals who representthat they are lawfully married and the court will not on its own initiative investigatewhether the married couple is same-sex or mixed-sex are in fact legally married. Counselrepresenting debtors or creditors should review and update their local courts practice onthis issue.By Heather Hildreth, Candidate for B.S. Physics and B.A. French at the University of Virginia2013; Jaclyn Morrison, Candidate for B.A. Sociology and French at the University of WesternOntario 2012; and Peter Califano, Esq. Cooper, White & Cooper LLP

In Re Balas & Morales Case Analysis

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In Re Balas & Morales Case Analysis Document Transcript