Gambling Debt In Chapter 7 Discharge

From time to time I speak with prospective bankruptcy debtors who have accumulated gambling debts. Some of these callers have borrowed large amounts of money on their credit cards to fund their gambling enterprises. The issue is whether money borrowed to gamble is dischargeable in bankruptcy. There are many court decisions dealing with aspects of this issue. The bankruptcy Code lists debts which are not dischargeable. Gambling debt is not among the list nondischargeable debts. However, if someone borrows a large amounts of money for any purpose without the ability or the intent to repay the debt the creditor can file a complaint seeking an order that the debt is fraudulent and not included in the bankruptcy discharge.

Court decisions generally have looked at the amount of gambling debt in relation to the debtor’s income and history of repaying the debt. Where someone borrows large amounts of money for gambling purposes and makes no significant attempt to repay the debt, or where the debtor’s income and expenses show that repayment of the debt, absent gambling winnings, would not be reasonable possible, the courts are likely to sustain a creditor’s challenge. However, gambling debts that are not disproportionate in relation to the debtor’s other consumer debts, and where the debtor repaid a significant part of the debtor over time, would likely be included in a bankruptcy discharge.

posted by Jonthan Alper, bankruptcy and asset protection attorney, Orlando, Florida