When people gamble, they can win. But let’s face it: not often. When they lose, they can lose big. When is a gambler entitled to relief under the Bankruptcy Code? While the answer is not entirely black and white, a February 29 decision out of the Northern District Ohio sheds some light on the issue.
The debtor’s gambling habit started just for fun (with no money) but then, money slipped into the games. The money was followed by credit cards. All of this led to a downward spiral during which time the gambling began to consume the debtor’s life. She visited online gambling sites in the morning before going to work, would come home from work at lunch and gamble, and then do it throughout the evening at the end of her work day. At some point, the debtor realized that it was out of control, and she started seeing a counselor.
After she stopped gambling and was seeing her counselor, she cut back on household expenses. She canceled her home internet service and checked emails only from work. However, by this time she had accrued high balances on her credit card accounts.
Rather than run to bankruptcy court, she attempted to investigate various debt consolidation services, but found that the monthly payments would be more than what she could afford.
Motion to Dismiss Filed
The US Trustee moved to dismiss the case for abuse of chapter 7. The UST argued that the debts were not a “result of sudden illness, calamity, disability, or unemployment. Debtor’s gambling debts were the decisive factor that pushed her to seek bankruptcy protection….and that she was intent on keeping the winnings if she won while foisting the losses of on her creditors if she lost.” Debtor argued that she did pay the creditors and attempted to do so, but when the bills arrived, they were much steeper than anticipated.
The court found that the debtor intended to repay the debt at the time she used the credit cards. “She was extraordinarily careless in allowing them to accumulate to such sums and in such a short period of time, but nothing presented in the parties’ briefs or at the hearing suggests that she was deliberately incurring the debtors with the intention of using Chapter 7 to escape them. “A fool, but an honest fool, Debtor remains.”
The court also believed that an interesting question arose that neither party addressed: the legality of the debt. Under federal law, namely, the Unlawful Internet Gambling Enforcement Act of 2006, credit cards cannot be used for “unlawful internet gambling” and it is “unlawful” if the gaming occurs where doing so would be unlawful under “any applicable Federal or State law in the State or Tribal lands in which the bet or wager was initiated , received, or otherwise made.”
“Void or unenforceable debtors cannot legally form the basis of a motion to dismiss for abuse of Chapter 7.” Undoubtedly, this debtor learned a lesson, and at the same time, obtained her discharge.
In re Baum, 07-61471, US Bankruptcy Court for the Northern District of Ohio
