Everyone’s finances are different, and for that reason everyone’s financial struggles are different. Thousands of people each year choose bankruptcy help to assist them with whatever type of financial difficulty they are having. There are different rules within the bankruptcy code for specific types of debt whether it be a secured debt like a mortgage or a vehicle, or unsecured debt like credit cards and medical bills. One type of debt that has more recently come onto the bankruptcy scene is gambling debt, and it must be handled with care.
According to the current Bankruptcy Code, dischargeable debt is debt that is eligible to be eliminated by filing bankruptcy, while non-dischargeable debt cannot. Some types of non-dischargeable debt are: student loans, child support, alimony, back taxes, and for many years gambling debt. Times changed, of course, and suddenly fewer gamblers were using cash, and instead they were able to gamble with their credit cards. This lead to quite a change for how gambling debt was handed within Chapter 7 and Chapter 13 bankruptcy cases.
Because credit cards fall under the category of unsecured debt they are typically dischargeable whether you are filing chapter 7 or filing chapter 13 bankruptcy. The “judge” that presides over bankruptcy cases is known as the trustee and they ultimately can choose which debts, if any, to object to. That is where the subject of gambling debt within bankruptcy becomes very messy. Whether you find a cheap bankruptcy lawyer or file bankruptcy yourself you will be required to disclose all of your financial information including gambling debt for the past couple of years.
Section 523(a)(2)(A) of the Bankruptcy Code provides an exception to discharge for debts obtained by “false pretenses, a false representation, or actual fraud. In plain English this means that Creditors owed gambling debts may file what are known as “adversary proceedings” to challenge the dischargeability of their debts. These cases are rare and extremely hard to win, but they do occur. In most cases they take place after the mandatory “Meeting of Creditors” and may require the debtor to pay additional attorney’s fees since the adversary proceeding is technically an extra civil suit.
In most cases if a trustee finds out about debt that was purposefully left off the bankruptcy paperwork or purposefully not mentioned in the bankruptcy hearing it he/she may suspect fraud in your case and it could affect the dischargeability of other debts you have. If gambling debt is the bulk of your financial struggles then you should be upfront with your bankruptcy attorney so that they can work to ensure that the trustee agrees that the debt should be dischargeable. Remember that filing bankruptcy is a way to get your finances on track and give you a fresh start so every little bit helps. In most cases even if the bankruptcy trustee decides to not erase your gambling debt they will still allow all other types of unsecured debt to be erased.