Bankruptcy Protection Incomplete for Same-Sex Couples
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Same-Sex Couples Less Protected When Filing Bankruptcy

The California Supreme Court's recent decision to legalize same-sex marriage has resulted in cheers from gay rights activists, sneers from those who believe marriage should only between a man and a woman and a slew of legal questions for those who decide to get hitched to their gay and lesbian partners.

As it turns out, differences in federal and state law could mean legal hurdles for same-sex spouses, with challenges in every area from filing bankruptcy to medical insurance. The San Jose Mercury News outlines some of the more complex issues surrounding the legalization of same-sex marriage.

As you may know, bankruptcy law is decided at the federal level (that is, the federal government makes bankruptcy legislation) but actually regulated at the state level. Each state has different property exemptions for those who file bankruptcy, for example, and different details of handling cases.

So how does this affect gay marriage? When heterosexual spouses are filing bankruptcy jointly, federal laws allow them to keep enough property to support both husband and wife. But because same-sex marriages aren't recognized at the federal level, gay married couples won't benefit from that particular protection.

What's worse is that, in the eyes of the state, debtors' spouses are responsible for any amount their spouses owe. In theory, then, someone in a same-sex marriage could not only miss out on some of bankruptcy's key protections, but have all his/her property seized as payment for his/her spouse's debts.

As if this loophole weren't discouraging enough, several other state/federal conflicts mean that same-sex couples could end up spending significantly more money on basic necessities than their heterosexual counterparts, meaning that they could have the potential to incur greater amounts of debt.

Federal tax breaks, for example, specifically benefit married couples and families, but don't apply to same-sex spouses (whose unions are not recognized by the federal government).

And then there's health insurance. While insurers that cover spouses and families have no problem insuring heterosexual spouses, many don't provide coverage for same-sex partners. If an insurance company is based out of a state that doesn't permit same-sex unions, the company could feasibly argue that the spouse is not eligible for protection.

With medical bills a frequent contributing factor to American bankruptcy filings, there's no question that the denial of insurance could be detrimental to people's finances.

What's more, even if an insurer does cover same-sex spouses, the federal government will view the cost of insurance as income and tax the insured's spouse for it.

The final punch comes in the form of caring for sick spouses: the Family Leave Act states that an employee cannot be fired for taking a six-week leave to care for a sick family member or spouse; however, since same-sex marriages aren't recognized at the federal level, and the law is a federal one, employers of those in gay marriages don't have to follow it!

Basically, then, because of the clash of federal and state laws, same-sex couples have greater financial obligations to the government and are awarded fewer protections in bankruptcy.

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