Gambling debts and Chapter 7 bankruptcy

Have some big losses at an Atlantic City casino contributed to the financial situation you find yourself in that has you considering bankruptcy? You may wonder if gambling debts can be discharged in Chapter 7 bankruptcy. The good news is that they likely can be.

However, you might get some pushback from the bankruptcy trustee assigned to your case. Gambling is a completely legal activity in places like Atlantic City, Las Vegas and casinos owned by Native American tribes throughout New York and the rest of the country. However, many people still consider it an irresponsible activity — particularly when the losses add up.

The main consideration for bankruptcy judges in determining whether gambling debts can be discharged, however, is if the debtor intended to repay the debt when they obtained it — usually through cash advances on their credit cards.

If it looks like a person intentionally maxed out their credit cards ahead of filing for bankruptcy and had no intention of paying their bill, that could be considered credit card fraud. That’s true whether they used the money for gambling or any other purpose. What’s at issue is whether the person had every intention of repaying the credit card debt or other loans when they obtained the money — whether it was to buy a new computer or spend an evening at the blackjack table.

If you’ve just recently racked up a considerable credit card debt at a high-limit casino ATM that you can’t repay, you likely will have a better chance of being able to discharge and not prompt questions about fraud if you don’t immediately file for bankruptcy.

If you have a gambling addiction that you’re addressing through a support group or therapy, a judge may also have more sympathy for your situation and be less likely to believe that you intentionally tried to defraud your creditors. Gambling addicts honestly believe that they’re going to win, even though the odds are against them. Casinos wouldn’t make any money if they weren’t.

If gambling — whether it was one bad night or an ongoing problem — contributed to your debt, there’s no reason to be ashamed. It’s essential to be honest with your attorney so they can help you seek the best possible outcome in your bankruptcy case.