Restructuring

Contributed by Abigail Lerner
(Although it is not typically our practice to analyze personal bankruptcy cases if the issues do not also arise in corporate bankruptcy practice, we report on the decision discussed below because it involves the intersection of bankruptcy law and a particularly topical issue – same-sex marriages and domestic partnerships.)
Over the years, we at the bankruptcy blog have reported on bankruptcy court decisions involving the interplay between the Bankruptcy Code and same same-sex marriages.  Specifically, we have brought to the attention of our readers the decision of the Bankruptcy Court for the Central District of California and that of the Bankruptcy Court for the Eastern District of Wisconsin, each holding that the debtors (same-sex married couples) qualified as “spouses” and were therefore eligible to commence a joint case under section 302 of the Bankruptcy Code.  Just yesterday, the   Bankruptcy Court for the Central District of California issued another opinion providing guidance as to the interplay between the Bankruptcy Code and same-sex unions.  Because the couple who filed the joint chapter 13 petition in In re Villaverde, however, were registered domestic partners, the court concluded they could not be considered “spouses” for bankruptcy purposes. 
Background
In June 2004, two women in a same-sex relationship registered as domestic partners in California.  At that time, California did not allow or recognize same-sex marriage.  Despite the subsequent legalization of same-sex marriages in California, they remained domestic partners, including in July 2015 when they filed a joint chapter 13 petition.  The chapter 13 trustee moved to dismiss the case, arguing that the debtors were ineligible to file a joint petition due to their status as registered domestic partners and not “spouses.”  The debtors, on the other hand, argued that since California law grants domestic partners the same rights as spouses, domestic partners should be deemed “spouses” who have the right to file a joint petition under section 302 of the Bankruptcy Code.
Bankruptcy Court’s Analysis
The bankruptcy court began by looking to the statute that permits the filing of a joint petition – section 302(a).  That section states, “[a] joint case . . . is commenced by the filing with the bankruptcy court of a single petition  . . . by an individual that may be a debtor . . . and such individual’s spouse.”  The dispute here, the court noted, was whether domestic partners are considered “spouses” for purposes of section 302.  The court first recognized that the Bankruptcy Code itself does not define the term “spouse.”  Second, the Defense of Marriage Act, which had provided the controlling definitions of “marriage” and “spouse” for all federal law purposes, was determined to be unconstitutional and no longer remains a federal statute specifically defining “spouse.”  Therefore, the court concluded it must look to the ordinary meaning of spouse by turning to dictionaries and similar sources and determined that, under those definitions, a spouse must be a married individual.
Having clarified the meaning of spouse, the court turned to the next issue – whether a domestic partner registered in California is considered to be a husband, a wife, or otherwise a married individual.  Turning to California law to answer this question, the court concluded that although the California Family Code offers the same rights to domestic partners as spouses, the language of other provisions of that Code nevertheless reinforces the point that domestic partners and spouses, or domestic partnerships and marriages, are distinguishable concepts.  Further, as much as the California legislature attempted to grant domestic partners the same rights as spouses, its intent, noted the court, was not to grant domestic partners the same status as spouses.
The bankruptcy court further remarked that “[b]ecause both same- and opposite-sex couples can get married and, as a result, file a joint petition, denying same-sex domestic partners the ability to jointly file is no different than denying an unmarried, cohabitating opposite-sex couple the same.”  As to the debtors’ argument that denying domestic partners the ability to jointly file constitutes discrimination, the court stated that the theory would have carried greater weight prior to the legalization of same-sex marriage, but no longer carries weight today where marriage has become widely available but, nevertheless, the debtors have chosen to stay in a domestic partnership.  For these reasons, the court concluded that domestic partners cannot be considered “spouses” under the Bankruptcy Code and are not eligible to file a joint petition.
Conclusion
As this case makes evident, interpretation of the Bankruptcy Code changes with the times.  No doubt courts, debtors, and bankruptcy trustees alike will continue to have differing views of Code provisions as laws change and new issues develop.  Only time will tell the manner in which they are resolved.
Abigail Lerner is an Associate at Weil Gotshal & Manges, LLP in New York.