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Gambling and bankruptcy

On our radio show on KLWN on 2-4-12, Judy and I discussed gambling and bankruptcy. Judy talked about the traits of a gambler. They were similar to the traits of a compulsive spender.

Just as compulsive spending can, gambling can affect a bankruptcy. One of the questions a person filing bankruptcy must answer is whether or not he or she had any gambling winnings or losses from gambling the prior couple of years. If so, the bankruptcy trustee would normally want to know if the person was using credit cards to pay for gambling. If so, the trustee might well object to discharge.

Of course, sometimes people don’t properly answer the question of whether or not they have had gambling losses or winnings. And that failure to answer truthfully can also hurt them–sometimes a trustee will object to the person obtaining their discharge of debt due to such failure to be truthful. How would a trustee find out if a person was gambling if he or she didn’t admit it in their bankruptcy paperwork? Trustees are told of these things by neighbors, co-workers, ex-spouses or even friends.

In a chapter 13 wageearner case, the filer must make payments to a trustee for 3 to 5 years. How much and how long they pay depends upon a number of factors. Normally, the only creditors paid are attorney fees for their attorney, secured creditors (mortgage loans and car loans, typically), and priority creditors (taxes and child support). And the unpaid, remaining creditors are discharged at the completion of the plan. But, they must pay what they can afford.

One chapter 13 trustee tells all persons filing 13 cases that gambling is sometimes the main reason a person files bankruptcy. And they can’t pay what they are required to pay (living expenses and plan payments) if they are gambling. If he finds out a person filing a chapter 13 is continuing to gamble, he will often file a motion to dismiss the case and the person must answer to the judge.

The judge and trustee are sometimes told by the debtor that he or she is only gambling “a little”, or only for “recreation”. They are dubious of this. And for good reason. A “little” gambling often escalates.

The trustee also sometimes says gambling at a casino is for those who are “mathematically challenged” because the odds are in favor of the casino. The longer the person gambles, the greater the odds are of losing to the casino. That’s why casinos stay in business.

A few years ago I stopped to get gas and the attendant asked me if I was going to buy a lottery ticket–I should, he said, because the pot was huge. I asked how much was the pot normally and he said even a small pot was somewhere in the millions. I asked if a lot more people bought tickets when the pot was as large as it was then and he said, you bet. I then asked….aren’t the odds far worse right now if so many more people were buying tickets?  And if I was going to buy a lottery ticket, wouldn’t it make more sense to buy them when the pot was low–still in the millions–and less people were playing? He just looked at me.

I have represented a # of people who have won large amounts of money gambling. And everyone eventually lost all the winnings gambling it away. As the trustee also says, there is one good word of advice about gambling–don’t.

My view is that gambling like many activities, might be fine as recreation…. IF the person can afford to do it…and IF the person keeps it under control.  But, I think its too expensive, addictive and should be avoided. If a person is thinking about filing bankruptcy, they can’t afford it and should stop it. Its not going to get themselves out of their financial difficulties and can make things worse.