Gambling debts are more common in bankruptcy than many people realize. With the rise of online casinos, sports betting apps such as FanDuel and DraftKings, and fast paced digital gambling platforms, more individuals are turning to bankruptcy for relief from the financial consequences of betting-related losses.
But how does gambling actually affect a bankruptcy case? In this post, we break down everything a prospective debtor needs to know – including the legal standards, what trustees look for, and how to protect your case.
Generally, the answer to this question is “yes.” However, as with all legal issues, the real answer is “it depends.” Gambling debts are considered unsecured creditors, and are treated similarly to credit card debt or personal loans in bankruptcy. This means that in a chapter 7 case, the debt would be dischargeable. In a chapter 13 case, gambling debts would be included in the payment plan with any remaining balance discharged at the end of the plan.
Gambling activity can raise red flags for the trustee, however. Recent or excessive gambling is especially a cause for concern to the trustee. This can lead to additional scrutiny from the trustee, and objections from the creditors.
While the debt itself is usually dischargeable, the timing and circumstances of the gambling matter.
If you incurred large gambling debts shortly before filing, creditors may argue you never intended to repay them. This can lead to claims of fraud and adversary proceedings, potentially resulting in a ruling that certain debts are non-dischargeable.
Courts look at factors such as:
While gambling debts are dischargeable, courts will scrutinize these debts more than others. The major concern is that the debts were taken on fraudulently, with no intent to actually repay them.
Cash advances—especially within 70 to 90 days of filing—are particularly risky. Under bankruptcy law, certain recent cash advances are presumed fraudulent, meaning the burden may be on you to prove you intended to repay them.
If the trustee or a creditor can show you used credit cards for gambling at a time you were insolvent, they may challenge the discharge of those charges.
Bankruptcy trustees will normally identify patterns of financial irresponsibility. However, gambling alone does not automatically disqualify you from bankruptcy relief.
A trustee may look at:
If gambling is sporadic or moderate, it may have little impact. If it’s heavy, recent, or tied to large credit usage, the trustee may question whether your filing was made in good faith. The trustee can also make a strong argument that the money that is spent every month on gambling can instead go to creditors.
Generally, gambling does not bar you from bankruptcy protection. Bankruptcy exists specifically to give individuals a fresh start—even those who made poor financial decisions.
However, recent gambling may affect:
For most people, these issues can be managed with proper preparation.
The following are some frequently asked questions regarding gambling and bankruptcy:
Not automatically. Fraud only applies if you incurred gambling debts knowing you couldn’t repay them.
Yes. Trustees can request financial records showing gambling transactions.
Casinos can file objections or adversary proceedings, but the automatic stay prevents collection actions while your case is active.
Only if the court finds evidence of fraud or bad-faith behavior.
Gambling can complicate a bankruptcy case—but it does not make bankruptcy impossible. Most gambling debts are dischargeable, and courts understand that financial hardship often involves complex personal circumstances.
If you have significant gambling-related debt and are considering bankruptcy, consult with an experienced bankruptcy attorney to ensure your case is properly prepared and documented.