What is ‘Bankrupt’?
By definition, bankrupt means you are declared in law unable to pay outstanding debts. This is a person judged by a court to be insolvent, and whose property is taken and disposed of for the benefit of creditors.
Incurring excessive gambling losses can often lead a person to go bankrupt. As a matter of fact, in the forms needed to file bankruptcy, one of the questions asked specifically refers to gambling debts.
For the most part, gambling debts can be eliminated with bankruptcy, because they are regarded as unsecured debts. They can be completely eliminated in a Chapter 7 Bankruptcy, however some situations can become complicated in regards to gambling debts and going bankrupt. To file for Chapter 7 bankruptcy, you are required to take a ‘means’ test to determine whether or not you are eligible, and if there is no fraud or misrepresentation involved, in most cases, you can completely eliminate your gambling debts.
Because Texas is, well… Texas, there is a history of gambling, or at least poker gambling. Texas Hold ‘Em, according to Texas State Legislature, originated in Robstown, Texas, dating all the way back to the early 1900s.
Before exposure on television, the internet, on social media, or mobile technology, famous Texas gamblers made Texas famous for being the State of Poker Players, even in places like Las Vegas and Atlantic City, which at the time, were the primary places to gamble.
Today, this is no longer true, and the ability to gamble is found almost anywhere, especially on the internet, where online gambling revenue is reported in the hundreds of billions every year. Gambling is offered on riverboats, cruise ships, state lotteries, bingo games, horse racing, offshore betting, and off track betting, to just mention the most popular venues.
Illegal forms of gambling are also widely available through bookmakers, and in private clubs and casinos. In Texas, regulated gambling primarily consists of the state lottery and horse racing.
Some special circumstances may allow for poker to be played in a private setting, but most forms of gambling are considered illegal in Texas, making sports betting, playing the slots, playing roulette, blackjack, or craps restricted. In fact, even the promotion of gambling is an illegal activity not permitted in the State of Texas.
As for the association between gambling and going bankrupt, many Texans have been able to eliminate gambling debts through their bankruptcy. Mostly, such gambling debts arise from cash advances on credit cards, casino credit, and casino markers or credit lines.
No matter how the debts are created, they can usually be cleared in a Texas bankruptcy.
Gamblers will often generate cash to gamble with by taking cash advances from their credit cards at a casino ATM machine. Then, when a gambler loses, they are faced with carrying large amounts of credit card debt later on.
Credit card debt usually comes at a high cost, because cash advances accrue interest at a higher rate than POS purchases. What happens next, is that quite often gamblers wil pay credit card debts with another credit card.
During this time, they will often take out more cash advances to continue gambling in the hopes of eventually winning enough to relieve their deepening debt.
This cycle can continue for quite a while, until a gambler’s financial world collapses. At this point, a gambler can end up financially destroyed, with a credit score in ruin, and then come face to face with the harsh reality of going bankrupt.
Casino credit is primarily extended as a marketing tool intended to generate profits for the casino. Unlike regulated lenders, casinos don’t charge interest for the use of their funds, however don’t be misguided into thinking that casino credit is free money. Casino credit is typically extended to an exclusive group of players, where a signature agreement to repay the casino. The total amount the casino extends is referred to as a ‘gambler’s credit line.’
In the context of going bankrupt, casino credit is treated like an unsecured signature loan, and is almost always dischargeable.
Casino markers, on the other hand, are advances of credit against funds on a deposit, or it is associated and linked to a credit card. Sometimes, a gambler can write the casino a post-dated check, which the casino accepts and agrees to hold it without cashing until a later date specified. Depending on the credit line of the gambler, casino markers can be valued at more than tens or hundreds of thousands of dollars.
In some jurisdictions, post-dated a check makes it a civil matter if the check is returned, and when involved in a bankruptcy case, this can complicate matters if the casino has deposited the check, or if they are still holding the post-dated check.
Bankruptcy cannot stop criminal proceedings against you for bad checks, unfortunately.
Aside from credit card cash advances, casino credit lines, and casino markers, there are other forms of debt incurred for gambling purposes which are often seen in bankruptcy cases. Payday loans, pawn shop loans, car title loans, and signature loans. Depending on the facts of a particular case along with the time frames associated, and whether or not the debts are secured or unsecured, will determine their dischargability in bankruptcy.
In the world of gambling, whether at a land-based or online casino, the number 7 is considered to be a lucky number, and in the world of debt, 7 can also be considered a lucky number, depending on your particular situation and perspective.
If you have lost your employment, encountered a medical illness, failed in business, or are down on your luck because of any other financial setback, your luck could change if you can file for Chapter 7 Bankruptcy. If the means test provides that you are eligible to file for Chapter 7, you can get rid of your burdensome debt, which might include gambling debts, credit card debts, and other unsecured debts, while keeping your property as allowed by law. The exemption laws are generous in the State of Texas, and for most Chapter 7 Bankruptcy filers, it allows them to keep all of their assets, while eliminating their dischargeable debt.
13 is considered to be a lucky number in the gambling world depending on what game you play, and in the world of debt, like the number 7, the number 13 can also be considered a lucky number depending on your particular situation.
Chapter 13 Bankruptcy is most often used to stop foreclosures, repossessions, and repay debts like child support arrears or back taxes that can’t be eliminated in a Chapter 7.
Chapter 13 can also significantly reduce unsecured debt such as credit cards, payday loans, and gambling debts. If you file a Chapter 13 Bankruptcy, unsecured debts are not entirely eliminated, but instead are paid back according to your disposable income.
Instead, they are paid back on terms based on your disposable income. If your disposable income determines that creditors are to receive 10 cents on the dollar, that’s what they have to accept. If you do the math, you can see the benefit a Chapter 13 Bankruptcy can have on reducing credit card debt.
Incurring gambling debts in casinos and potentially eliminating them in bankruptcy is one thing, but incurring illegal gambling debts and attempting to get rid of them in bankruptcy is another.
You can’t discharge illegal gambling debts in a bankruptcy proceeding. The United States Bankruptcy Code cannot discharge debts incurred from illegal activities. So if you owe an illegal bookmaker, or an online casino tens of thousands of dollars and need debt relief, the Bankruptcy Court is not the forum to address those debts.
Even though legal gambling debts may be eliminated in bankruptcy, there are certain situations where such gambling debts might not be discharged in a bankruptcy. These are usually cases where fraud, deception, or criminal activity is involved.
Any debts incurred 90 to 180 days prior to your Bankruptcy filing will be scrutinized. You have the burden of proof to show the debts incurred were reasonable and necessary so they can be discharged.