Restructuring

Contributed by Adam Lavine
(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 – the ability of same-sex couples to have their marriages recognized under the law.)
In United States v. Windsor, the Supreme Court struck down the Defense of Marriage Act’s federal definition of “spouse” as “a person of the opposite sex who is a husband or a wife.” The Supreme Court did not, however, opine on the constitutionality of state laws that ban or prohibit the recognition of same-sex marriages. Although challenges to such laws have been winding their way through this nation’s courts’ system at an impressive pace since Windsor, they remain intact in a number of states. For example, in Wisconsin, a constitutional amendment declares that the only “marriage” valid or recognized is a marriage “between one man and one woman.”
Despite this constitutional amendment, in In re Matson, the Bankruptcy Court for the Eastern District of Wisconsin recently permitted a married, same-sex couple to commence a joint chapter 13 case. The debtors were legally married under the laws of Iowa but resided in Wisconsin.
Section 302(a) of the Bankruptcy Code
In Matson, the validity of the debtors’ marriage arose as a legal issue as a result of section 302(a) of the Bankruptcy Code, which states:

A joint case under a chapter of this title is commenced by the filing with the bankruptcy court of a single petition under such chapter by an individual that may be a debtor under such chapter and such individual’s spouse.

11 U.S.C. § 302(a) (emphasis added). Relying on this provision, one of the debtors’ creditors moved to dismiss or bifurcate the case on the basis that the debtors were not “spouses” for purposes of section 302(a) because Wisconsin does not allow or recognize same-sex marriages.
Prior to Windsor, the United States Trustee had relied on the Defense of Marriage Act’s federal definition of “spouse” to make similar arguments in other cases. As we previously reported, however, the Department of Justice stopped challenging the validity of joint bankruptcy petitions filed by same-sex couples in 2011. See our previous post here.
The Bankruptcy Court’s Analysis in Matson
In Matson, the bankruptcy court was faced with having to interpret the meaning of the term “spouse” in a post-Windsor world in which no federal law provides a definition for this term. After observing that “the definition and regulation of marriage has been treated as being within the authority and realm of the separate states,” the bankruptcy court decided to look to state law to determine whether the debtors qualified as “spouses” for purposes of section 302(a) of the Bankruptcy Code. Thus, the issue in Matson became one of choice of law principles: should the court apply Wisconsin law or Iowa law when determining the validity of the debtors’ marriage under the Bankruptcy Code?
To determine which state’s law to apply, the bankruptcy court employed the “place of celebration rule.” Under the “place of celebration rule,” courts recognize a marriage as valid, at least in regard to its formalities (e.g., different states have different age restrictions on marriage), if the marriage is valid under the law of the place where it was performed. Because the debtors were legally and validly married in Iowa, the bankruptcy court applied Iowa law to the dispute and, therefore, held that the debtors qualified as spouses under section 302(a) of the Bankruptcy Code.
By framing the issue as a matter of choice of law, the bankruptcy court avoided an analysis of equal protection. Despite the absence of constitutional considerations, Matson is significant. According to the bankruptcy court, Windsor was a narrow ruling that stands for the following proposition: “individuals married in a jurisdiction recognizing same-sex marriage and currently living in a state that recognizes same-sex marriage are entitled to have their marriage federally recognized.” Under this reading of Windsor, Windsor did not answer the question of whether individuals married in a jurisdiction recognizing same-sex marriage but living in a state that does not recognize same-sex marriage are entitled to federal recognition of their marriage. Matson arguably provided an answer to this question. Under the “place of celebration rule” as applied by the court in Matson, a federal court will recognize a same-sex marriage as valid for federal purposes, regardless of the laws of the state in which the court sits, so long as that marriage is valid in the state in which it was performed.