Betting on a Fresh Start? How Gambling Debt Is Treated in Bankruptcy

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Do you like to place the occasional bet? Have you enjoyed a jaunt to Vegas now and then to play the slots? Or are you a dyed-in-the-wool gambler who can’t pass up an opportunity to place a wager? Have you ever borrowed to gamble? 85% of all adults have gambled at least once but for some people, once is not enough and there is an underlying compulsion that can lead to lots of problems, debts and may have those in trouble looking to bankruptcy for relief.

Even if bankruptcy helps deal with your current gambling debts, if you have an addiction you’ll likely end up back in trouble. Signs that you’ve got a gambling problem include the need to bet and to bet more and more frequently, difficulty stopping and continuing on with the behavior despite mounting debts, knowledge that there’s a problem and the onset of negative consequences. If this is your case, you should consider getting treatment before filing for bankruptcy so you don’t squander the fresh start that bankruptcy can represent.

So how do you acquire gambling debt? Some people run up their credit cards, some take second mortgages while others tap into lines of credit offered by a casino. Gambling debt is classified as unsecured debt and therefore (in theory at least) should be completely written off in a chapter 7 bankruptcy and deprioritized behind secured debts in a chapter 13 filing. But as we’ve written recently, sometimes creditors can fight back and protest the debt being discharged.

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With discharge of debts, it all comes down to intent. If, for instance, you max out your credit cards and then turn around and file a chapter 7, that looks like fraud. If you go buy a house full of furniture from Rooms to Go on their easy payment plan and then file a chapter 7, that looks like fraud. And if you run up a pile of gambling debts and then file for bankruptcy protection, that also looks like fraud. It’s all about intent. Maybe you charged up your cards and then lost your job. That’s a valid defense to an allegation of bankruptcy fraud.

But if you know you have a gambling problem and know that you’re deep in debt and that you don’t have the money, assets or income to satisfy the debt, then a case can be made that you intentionally committed fraud when you signed a marker or took on a line of credit to gamble. Casinos can actually try to file a criminal fraud case if you took the money, gambled it away and ran. But if you took out the debt in Atlantic City or Vegas and live in North Carolina, filing criminal charges may be more complicated and less likely.

So with bankruptcy and gambling debts there are three issues to consider. First is the underlying problem (if there is one) of gambling addiction. Seeking treatment before you turn to bankruptcy makes sense and may protect you from criminal or bankruptcy fraud accusations. Second is whether you will be accused of bankruptcy fraud. Treatment will help, so too will a lapse of time between when the debt was taken out and when you file for bankruptcy protection. Third is making the most of the fresh start a bankruptcy offers. If you don’t have your problem under control, your financial fresh start may be squandered if you go back to betting.

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If you have gambling debts, the best thing to do is contact a reputable North Carolina bankruptcy attorney like John T Orcutt for expert advice on your debt dilemma. Come in for a free consultation, tell us about your debt circumstances and we’ll offer you expert advice on the best options for your financial future. Don’t delay – contact us now!