July 8, 2011 / 10:45 PM / 8 years ago

U.S. shifts policy on same-sex bankruptcies

NEW YORK (Reuters) - The U.S. Justice Department has dropped its opposition to joint bankruptcy petitions filed by same-sex married couples in a victory for supporters of gay marriage.

The policy change is the latest setback for the 1996 Defense of Marriage Act (DOMA), which has come under increasing pressure since the Obama administration said in February that it would no longer defend its constitutionality.

Until now, the Justice Department had routinely intervened to stop joint bankruptcy cases filed by same-sex couples.

The Department’s position had been that the bankruptcy code only allows joint filings by opposite-sex spouses as defined under the federal Defense of Marriage Act, which bars federal recognition of same-sex marriage.

In an unexpected turnabout, the department on Wednesday filed a request to withdraw its appeal in one such case. Justice Department spokeswoman Tracy Schmaler confirmed the policy change in an e-mail to Reuters on Thursday.

“The Department of Justice has informed bankruptcy courts that it will no longer seek dismissal of bankruptcy petitions filed jointly by same-sex debtors who are married under state law,” she wrote.

The case involved Gene Douglas Balas and Carlos Morales, who were married in California in 2008. They filed a joint bankruptcy petition on February 24, the day after Attorney General Eric Holder said in a letter to members of Congress that the Obama administration would no longer support the Defense of Marriage Act in court.

In June, a bankruptcy judge in Los Angeles held that the Defense of Marriage Act was unconstitutional and could not prevent Balas and Morales from filing a joint bankruptcy petition. Twenty of the 24 federal bankruptcy judges in Los Angeles signed onto the opinion.

The Justice Department filed a motion to dismiss the bankruptcy case on April 15. It sought to withdraw that motion on Wednesday.

“The decision to stop filing motions to dismiss bankruptcy petitions avoids generating costly and time-consuming constitutional litigation,” Schmaler said in her e-mail.

The U.S. Trustee, the division of the Justice Department charged with enforcing the bankruptcy code, has also withdrawn its objection to a joint filing by another same-sex couple in California, Schmaler said.

The lawyer representing Balas and Morales, Robert Pfister, said he was delighted by the policy change.

“It’s more than we could have hoped for,” he said. “Now we have a change in nationwide policy.”

Reporting by Terry Baynes, Editing by Cynthia Johnston

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