By Christopher C. Carr, Esq. Chester County bankruptcy attorney.
Why do some people already in dire economic shape gamble? Prudence suggests that they should not do so but gamblers are notoriously imprudent. Well ironically they often do so because they foolishly believe that they can gamble their way out of debt. Other gamblers think they can win enough money to pay back their gambling debts– debts they may have rung up on their credit cards, money owed to casinos or riverboats, loan debt, and even home equity debt all associated with gambling problems–but quite the opposite happens. You only end up creating more gambling debt to repay. And even if you actually did win enough money to pay off your debt, you would most likely gamble that money away too, thinking if you won once you could win again. GA and other organizations can help to cure the addiction but the debt that persists is a slippery slope tempting the gambler to return to the game of choice and chance. So oftentimes it is necessary to cure the debt problem to alleviate the addiction. And there is only one way to effectively do so, a Chapter 7 (or 13) bankruptcy, which if successful can wipe the slate clean in one fell swoop. Thus, Bankruptcy may be the only option for dealing with gambling debt.
If you owe bookies or loan sharks, you may be forced to borrow money from a friend or family member to pay the gambling debt, especially if you’re being threatened with reprisals if you do not pay up . But borrowing money from a loved one, while perhaps better than having your legs broken, may not be such a good idea because all such debts will be discharged in a Chapter 7 bankruptcy leaving them high and dry.
I tell such clients that they should pay some of the money they are gambling away to me instead. Gambling is risky and the “odds are stacked in favor of the house” but I am a sure thing, or nearly so. What stands in the way of a fresh start in Bankruptcy for the gambler?
- Fraud: Gambling debt, including debt incurred from casinos or charged on credit cards and loans, can be discharged in bankruptcy. It’s important to know that any creditor can object to the bankruptcy filing by claiming you incurred the debt under false pretenses or through fraud. For example, if you took out a credit card cash advance knowing you didn’t have the money to repay the advance when you borrowed it, the creditor can ask the court not to discharge the debt. Creditors owed gambling debts may file “adversary proceedings” to challenge the dischargeability of their debts under Bankruptcy Code section 523(a)(2)(A) provides an exception to discharge for debts obtained by “false pretenses, a false representation, or actual fraud.” These suits, historically filed by casinos, are rare today. They are expensive, cast the casino and its entire industry in a bad light and with the rise of legalized gambling, are no longer favored by the courts. The gambler’s creditor has the burden to prove that the gambler actually committed fraud, in other words that you had the intent not to repay the debt when incurred and that is barring some lucky (or more likely stupid) admission, very difficult to do.
- Reporting Requirement: All gambling losses within the previous year must be reported on the Statement of Financial Affairs which is part of every bankruptcy filing. This is required so the bankruptcy trustee and court can determine whether any fraud was involved in the bankruptcy filing. Bankruptcy trustees have broad powers to avoid transfers which appear fraudulent because they are transfers for which the debtor received “less than reasonably equivalent value,” which is the basic benchmark for determining fraud under the Bankruptcy Code. This requirement may pose obvious difficulty for the gambler who has been dealing with loan sharks who may act aggressively to keep from having their names become a matter of public record.
- Luxury Debts: However unlikely it is that the casino will win an adversary action, there is another bar standing in the way of clearing very recent gambling debt. Bankruptcy Code section 523(a)(2)(C) makes a debt non-dischargeable if the debts was for a “luxury good or service” over $1,225 and purchased within 60 days of the filing of the bankruptcy. That section also precludes discharge of cash advances over $1,225 obtained within 60 days of the filing of the bankruptcy. In most cases, the exception can be avoided by simply waiting the requisite 60 day period of time
to file the bankruptcy. However, this may not be as easy as it sounds for the compulsive gambler. Often the lawyer must demand a turnover of all credit cards, etc. so that the problem is cut off at the source. - Chapter 13: Impossibility of fulfilling the plan because of compulsive gambling: oftentimes a gambler who is behind in house or car payments because of money diverted to gambling will have no choice but to file a Chapter 13. This requires a 3-5 year plan wherein the gambler promises to repay some of his debts. But the plan must be funded by the gambler’s income and little threatens income as effectively as compulsive gambling. Thus, may trustees and courts (tipped off by the required gambling disclosures…see above) will closely scrutinize such a plan and may demand that the gambler be under the treatment of a psychiatrist and/or regularly attending GA meetings before they will give it the go ahead. A clean recent bank and/or credit card statement(s), not showing large withdrawals, can also be very helpful in showing that the gambler has the self control needed to suceed with a plan in a Chapter 13.
It is clear that the cure of the gambling addiction and its economic fallout go hand in hand. One cannot easily be repaired without the other. We are experienced in dealing with the problems of and in counseling gamblers and would be happy to discuss the issues facing you or a loved one challenged by this affliction.
Law Offices of Christopher C. Carr, MBA, P.C., is a quality bankruptcy and debt relief practice, located in Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified legal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester, Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!
Christopher Carr, Esq. on Debt Relief 