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DOMA Ruling Allows Joint Bankruptcy Filings by Same-Sex Married Couples

On June 26, 2013, the U.S. Supreme Court issued a 5-4 ruling striking down the federal Defense of Marriage Act (DOMA). The law denied federal benefits to same-sex couples including those legally married in states that permit such unions. That meant that filing for joint bankruptcy – that is, filing a single petition instead of two individual petitions, thereby saving money on legal fees and in other ways – was usually not an option for legally-married same-sex couples.

Bankruptcy in the U.S. is subject to federal law – the U.S. bankruptcy code. The law varies somewhat from state to state, but bankruptcy cases in the U.S. are heard in federal court. That means bankruptcy cases were subject to DOMA. The prohibition of joint bankruptcy filings by same-sex married couples was not ironclad, however.

In fact, determining whether such a couple could file jointly has been a confusing matter for some time. Under the direction of presiding judges, some bankruptcy courts have allowed joint petitions by same-sex married couples. In June, 2011, a California bankruptcy court ruled that DOMA violated the U.S. Constitution’s guarantee of equal protection. In an unusual move, 20 bankruptcy judges signed onto a ruling rejecting the U.S. trustee’s office’s request that the joint bankruptcy petition of two legally-married California men be dismissed. Prior to that, a very small number of judges had called DOMA unconstitutional.

Just three weeks later, the U.S. Department of Justice announced that it would stop opposing joint bankruptcy filings of same-sex married couples.

But that still did not mean that those couples could count on being able to file jointly. Individual bankruptcy judges exercise great discretion in how to handle cases presented to their courts. They need not heed the rulings or opinions of other bankruptcy judges.

Daniel Maltbie and Garry Houston made news recently when they filed for joint bankruptcy. Having married in Vermont in 2003 and subsequently moved to Florida, they anticipated a rejection of their petition by judges sympathetic to DOMA and to Florida’s non-recognition of same-sex marriages. The couple and their attorney had indicated a willingness to appeal the case in the event their filing was dismissed.

Following the Supreme Court ruling in June striking down DOMA, Maltbie and Houston and many other couples in similar situations expect their cases to proceed smoothly. The decision affects many federal benefits in addition to joint bankruptcy filings, and it remains to be seen how quickly and completely it will be reflected in the government’s laws and day-to-day practices.

Posted on Wednesday, August 28th, 2013 at 5:35 am under Bankruptcy.
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Two Hundred Million Dollars in Housing Relief Coming to Struggling Floridians

Families throughout Florida and the United States have struggled for years to make ends meet during a deep recession and a lackluster recovery. Many homeowners currently have no equity – if they can no longer afford their homes, they face foreclosure or a short sale. Others, even if they are lucky enough to have steady income from a job or public benefits, may still find themselves priced out of a decent home due to rising prices both on sales and rentals. Recent years have seen large numbers of families forced into foreclosure or bankruptcy as a way to regain control of their finances.

A bill recently signed by Gov. Rick Scott should bring some much-needed relief to Florida. SB 1852 will distribute $200 million to a number of programs designed to ease Floridians’ housing woes. The funds are part of a $25 billion settlement between 49 states and the nation’s five largest mortgage lenders – JP Morgan Chase, Citigroup, Wells Fargo, Bank of America, and Ally Financial – to settle allegations of improper lending practices. As one of the hardest-hit states in the aftermath of the housing bubble, Florida received just over one third of that, or $8.4 billion.

Most of that money will come in the form of modifications of the terms of existing mortgages and writedowns to their outstanding principle. The Florida government received a distribution of $334 million in April. Of that, $60 million was designated for assistance in paying down mortgages, and $73 million went to the state’s general revenue fund, where it may be spent on non-housing-related programs. The remaining $200 million sat in limbo for some time until Scott’s recent signature on SB 1852.

That legislation directs the funds to several different housing programs. The State Apartment Incentive Loan program will receive $60 million to help pay for rental homes for the elderly and disabled. The State Housing Initiative Program, which funds municipal efforts to help low-income homeowners keep and maintain their homes, will receive $40 million. Foreclosure courts will receive $40 million to help reduce the foreclosure backlog. Habitat for Humanity will receive $20 million. Domestic violence shelters and a program for housing the homeless will each receive $10 million.

This is all good news, but meanwhile, attorneys general in Florida and other states have received troubling allegations that banks are not complying with various aspects of the settlement. New York Attorney General Eric Schneiderman has threatened to sue Wells Fargo and Bank of America over concerns they are dragging their feet on processing valid and proper requests from homeowners for lower mortgage payments. Florida Attorney General Pam Bondi’s office has received 293 complaints of violations of the settlement and say they are investigating every one. Bondi said they are doing everything they can to hold the banks accountable, but stopped short of threatening a lawsuit, indicating that other legal processes must play out first.

Posted on Wednesday, August 14th, 2013 at 11:34 am under Bankruptcy, Real Estate Law.
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