Gambling Debts and Chapter 7

Let’s face it — sometimes people do not make the best decisions and end up gambling at the casinos or elsewhere a little more than they should.  Sometimes, those gambling debts add up and then you are facing bankruptcy.

For debts that are unrelated to gambling, bankruptcy can help.  Depending on which chapter you choose — Chapter 7 or Chapter 13 — you may be able to keep your home, your car, or other assets. Then you pay what you can to your unsecured creditors and the courts will discharge the rest of your debt,

The problem is that gambling debts are a little different — at least in the eyes of the court.  And there is no way to get around disclosing them to the court.  Gambling losses incurred during one year prior to the bankruptcy filing must be disclosed to the court in the Statement of Financial Affairs that is filed with the bankruptcy court.  The bankruptcy trustee appointed over your case or another creditors may object to the discharge (the wiping away) of gambling debts on the grounds that when you incurred the debt you had no real intention of repaying the debt and now you are just using bankruptcy as a way out.

Debts that are incurred under false pretenses of by fraud are nondischargeable under section 523 of the Bankruptcy Code.  On the other hand, proving fraud and false pretenses in court is harder than you think and a trustee or creditor might not have the stomach for the fight.  So here are some points to remember if you have gambling debts and think bankruptcy might be in your future:

1.  If large credit card advances to casinos are made right before you file for bankruptcy, the court may decide the debts were not incurred with the intention of paying them back and the debts may not be discharged.
2. if you sign a marker for chips, which usually has on it somewhere a statement that you have sufficient funds to cover to the chips, and in reality you do not the funds to cover, the court may find that you borrowed deceptively and deny your discharge.
3. If you realize your gambling is out of control and you have stopped, maybe attended a few Gamblers Anonymous meetings, and tried to make some payments on it, then you will have a better chance at showing the court that you had the intention to repay the debts.

If you find yourself in a difficult situation with your gambling debts, don’t make it worse.  Call our offices and speak to a qualified attorney that can explain your options and help you approach your problems and put them in the best light possible.