By Ryan C. Wood
Whether you suffered a huge loss because you have a gambling addiction, or just had bad luck in the casinos that one time you now owe the casino money from a marker received. The question is: what happens if you are unable to pay the casinos back? Can you file for bankruptcy to have the debt discharged? The answer is of course it depends and timing and circumstance are everything. In a perfect world you will not have to deal with such a thing, but of course nothing is perfect. This is especially true when talking about gambling.
Credit card used to pay for gambling debt
If credit cards were used to pay for the gambling debt, especially with online gambling sites, then the question of whether that debt is dischargeable in bankruptcy depends on the totality of circumstances. The bankruptcy court can deny a discharge if they believe that filing the bankruptcy was an abuse of the bankruptcy process based on bad faith. This is pretty rare in reality. A discharge can also be denied if a creditor or party-in-interest files an adversary complaint alleging fraud was involved in incurring the debt. At that time that you used the credit card to pay for the gambling, did you have the intention of paying it back? Were you going to pocket the winnings, but try to discharge any losses incurred? There are a lot of factors to look at in determining whether the bankruptcy filing was an abuse of the bankruptcy process. The bankruptcy trustee will be bringing an action against the bankruptcy filer if they believe there was an abuse of the process. The credit card lender can file a non-dischargeability action against the bankruptcy filer if they believe that there was fraudulent activity in obtaining the credit to gamble on the credit card. If you pass the bad faith and fraud test, then the gambling debt should be dischargeable in bankruptcy.
Casino markers/counter checks/post-dated checks
If you are gambling in Las Vegas and a casino issues you a marker, counter check, or if you are signing a post-dated check, what normally happens is the casino would give you credit for a certain dollar amount on the marker. The casinos will claim that you are promising to repay the amount at a later date and at the time that you sign the marker, counter check, or post-dated check, you are representing to the casino that you have the amount in your bank account. If you win the money, hopefully you pay them back and they rip up the marker, and you get to keep whatever the remaining winnings are. However, if you lose the money, a casino will still expect you to pay the amount that you received credit for. If you do not have the funds in your bank account, then the casinos could turn the case over to the District Attorney’s office, where they could prosecute you not paying back the marker, counter check or post-dated chdeck. If you do not respond, or if you are not from the Las Vegas area, there could be a felony warrant issued for your arrest. This would be a criminal prosecution, and not a civil matter that could be dischargeable in bankruptcy. Bankruptcy proceedings would not be able to stop criminal actions against you or discharge potential resulting restitution upon conviction. Thus, even if you file for bankruptcy, it may wipe out the debts that you have, but the district attorney’s office can still criminally prosecute you. In addition, if you file for bankruptcy, a casino, at their discretion, can pursue a non-dischargeability action under 11 U.S.C. §523(a)(2) or 11 U.S.C. §523(a)(4). If they win, and have the gambling debt deemed non-dischargeable, then you would still continue to owe the money even after you receive a discharge of your other debts.
The best you can do is seek to file bankruptcy prior to the filing of criminal charges or referral to the district attorney’s office for prosecution. If you qualify you will receive a discharge and hopefully life goes on. It also may be in your best interest to file a Chapter 13 case even if you qualify to file for Chapter 7 and pay something back to your creditors. The casinos and your other creditors then file proof of claims in the Chapter 13 to prove what they are owed and get what they get via the Chapter 13 plan or reorganization and do not refer you for criminal prosecution. Beautiful. Life goes on.
Furthermore, Indian casinos are not subject to the Fair Debt Collection Practices Act (FDCPA). Indian tribes have sovereign immunity, so you cannot sue them under the FDCPA even if they are calling and harassing you.
If you have gambling debts you need an experienced bankruptcy attorney to help you. Some attorneys will just say they are not dischargeable without discussing with you the details to make a real determination. There are all kinds of gamboling debts and how they were incurred and when matter. While no one really wants to file for bankruptcy protection it can make all of your debt problems go away forever by federal court order. A beautiful thing. The best bankruptcy attorneys will usually provide a free consultation to confirm how bankruptcy can help and how much work and fees your case warrants. You can spend thousands and thousands of dollars treating the cancer; or you can choose to file bankruptcy and cure the cancer forever by law and receive a federal court order discharging your debts.