How does gambling affect your finances in bankruptcy?
Image Source: Flickr User Matthew Powell
Ed Boltz, a leading bankruptcy attorney at the law offices of John T. Orcutt, recently served as an expert for Slate.com on a bankruptcy matter. One of Slate’s money experts, Helaine Olen, consulted Mr. Boltz on a question about bankruptcy and gambling. The Slate.com reader asked what would happen if she wanted to file bankruptcy for her medical bills in light of her losing money gambling online in an attempt to earn cash to pay off her debts. Below is a look at how gambling affects your odds of successfully filing bankruptcy.
How does gambling affect your finances for taxes and bankruptcy?
First of all, the government – including the IRS and bankruptcy courts – recognize gambling losses and income. So the good news is, for this advice-seeking consumer, she can deduct her gambling losses on her tax return so long as she itemizes deductions. This woman was gambling online through a website, so can easily use her credit card statements as evidence of the expense and loss. Losing at a weekly poker game is another matter since it’s tougher to document.
In bankruptcy, the key issue is the source of funds that you used to fuel the gambling. If they were from your wages, checking account or savings, that could be a problem because the bankruptcy Trustee assigned to your case could press the issue that the money lost gambling should have gone to creditors instead. If, however, the funds were from a retirement account or racked up on credit cards, that’s a different issue. Also, if you have gambling losses charged to a credit card and then don’t pay the bill, that impacts tax filing limitations as well.
Which bankruptcy chapter is best in this case?
Chapter 7 is the more sweeping form of debt relief because it discharges credit card and medical bills – and the latter is the problem for the creditor in question. But if the gambling funds were from cash that should have gone to creditors, North Carolina bankruptcy attorney Ed Boltz says, “Chapter 13 may be a better alternative, so there is no question as to the ‘good faith’ of the filing. But the gambling losses will still have to be revealed as part of the bankruptcy process.”
Chapter 13 bankruptcy puts you on a three- to five-year plan to repay your past due balances on secured debts, such as your mortgage or auto loan, and then applies some amounts to your unsecured accounts, including medical bills and credit cards. At the end of the repayment plan, remaining balances on unsecured debt is also discharged in most cases. Boltz also advises that you “seek the advice of an experienced and reputable bankruptcy attorney to discuss your debt circumstances and the best course of action for you.”
Help for North Carolina consumers in debt
If you live in North Carolina and are deep in debt, contact the Law Offices of John T. Orcutt for a bankruptcy consultation with Ed Boltz or one of our other expert bankruptcy attorneys. We can help you get a fresh financial start and get out from under insurmountable debt. You don’t have to live paycheck to paycheck and dodging creditor calls – there is a better way.
Call +1-919-646-2654 now for a free consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington. Call now and get the financial peace of mind you deserve.