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Home 9 Bankruptcy 9 Is gambling debt dischargeable in bankruptcy?

Is gambling debt dischargeable in bankruptcy?

by | Jan 12, 2015 | Bankruptcy

Compulsive gambling is a problem in Wisconsin like it is most other states where casinos and other legal gambling opportunities are bountiful. Sadly, the lure of a big win has led many Wisconsin residents to lose their savings and get into serious debt.

In fact, a recent article from the Appleton Post-Crescent reported that the average debt of compulsive gamblers who called the Wisconsin Council on Problem Gambling’s helpline in 2014 was $47,000.

The Wisconsin Council on Problem Gambling also said they received more calls than ever in 2014, with 14,731 calls coming in. Unfortunately, by the time most people ask for help with gambling problems their debt has already spiraled out of control.

Many gamblers in over their heads with debt wonder if it is possible to have their gambling debts forgiven by bankruptcy. Federal law doesn’t specifically prohibit the discharge of gambling debts, but the court can treat these types of debts differently than other forms of debt.

Additionally, debts that were incurred under false pretenses or through fraud are not dischargeable under federal law. Although gambling debts aren’t always incurred under false pretenses or through fraud, they can be in certain circumstances.

For example, if the gambler signed a credit marker in exchange for chips claiming that he or she had enough money to cover the chips when that was untrue, that could be considered borrowing deceptively.

Or if the gambling that took place was illegal, the bankruptcy discharge could also be denied on the basis of fraud.

Finally, the gambler’s creditors or bankruptcy trustee could potentially challenge the bankruptcy on the basis that the gambler incurred the debt with no intention of ever paying it back.   

Ultimately, individuals who are overburdened by debt that was fully or partially made up of gambling losses should talk to an experienced bankruptcy lawyer in their area about their options. Although your situation may seem daunting, know that help is available.