Same-sex marriage may or may not be legal in the state(s) where you collect debt, but like most collection industry professionals, you are probably watching closely as, state-by-state, people of every sexual orientation are changing the way they feel and vote. In the process, even politically conservative states, like Utah, are facing major issues over whether or not same-sex marriages, legal for just a few days, will continue to be recognized under state law.
NL can’t give you legal advice, but you may find yourself struggling to give advice to forwarders and to prosecute or defend individual clients who have both substantial debt and a same-sex partner. Therefore, it behooves all of us to learn as much as we can before we find ourselves in the middle of a situation that we are unprepared to deal with. Because many of the issues that are arising have very little precedent, what you learn and the advice you give can change almost daily.
Debt Owed or Incurred
Not the least of the legal issues is the debt owed or subsequently incurred by one or both of the same-sex partners. And the issues are not limited to the state where the marriage was performed. In our mobile society, in-debt couples who move to a state where same-sex-marriage is not legal are causing additional challenges for debt collection. Steve Sanders, an associate professor at Indiana University’s Maurer School of Law cautions in an article on creditcards.com that “It’s unclear how the [DOMA] ruling applies to same-sex married couples who have moved to states that do not recognize those marriages. Will the federal government follow the marrying state’s understanding, or the new state’s understanding? That’s a big wrinkle the courts will have to resolve.”
The Supreme Court decision to declare the federal Defense of Marriage Act (DOMA) unconstitutional, is giving many same-sex couples hope that marriage is in their future. But like many heterosexual couples, they don’t always consider the financial consequences. For example, as with heterosexuals, how much of a gay spouse’s debt a partner can be held responsible for largely depends on the state where they live.
Community Property Laws
CreditCard.com advises gay couples, “In most states, if the debt isn’t in your name and you’re not a joint account holder or a co-signer, it’s usually not considered your responsibility. But if you live in one of the nine community property states, any property acquired during the marriage is considered to belong to both partners and creditors could go after it. You could also be jointly responsible for any debt your spouse racks up during the marriage.” As the agency or law firm trying to collect the debt, you will have to refer to your state’s current laws regarding the financial responsibilities of same-sex couples, whether they were married in your state or not. Even community property laws vary from state to state.
Who a debt collector can contact is also an issue. If a state recognizes gay marriage, then collectors might assume that because the state’s debt collection laws normally allow communication with a consumer’s spouse in a heterosexual marriage, a collector could also communicate with the spouse of the consumer in a same-sex marriage. ACA International Collector Magazine article advises that collectors must look to both state and federal law to answer that question.
Student Loans and Debt
All marriages, whether same-sex or heterosexual, can be financially detrimental rather than beneficial. For example, married people might qualify for less federal financial aid for college and the spouse might be deemed liable to repay the debt. Depending on several factors, creditors could go after the assets of a same-sex partner in order to collect the debt.
Safeguards Limiting Debt Collection
Same-sex partners may have put several safeguards in place that could limit debt collection: separate bank accounts, no comingling of assets such as co-signing on property, or a prenuptial agreement that identifies debt acquired before marriage as belonging only to the person who acquired it. In some states, regardless of the sex of the partners, specific assets such as retirement plans and primary residences can be protected from creditors by “tenancy in entirety.”
Changing Times, Changing Laws
Because the laws with regard to same-sex marriage are still evolving and are likely to continue to do so for some time, collectors should consult with an attorney licensed to practice law in the state in question prior to attempting any collection action against a consumer’s same-sex partner or spouse. If you want to be that attorney, you’ll have to keep your eyes and ears open, in order to stay up-to-date on the law during these changing times.
By Marti Lythgoe, NL Editor