Eliminating gambling debt may appear to be the priority, but the first step any problem gambler should take is getting help to come to terms with his or her addiction. Gambling losses regularly occur very quickly, but paying off debt takes far longer. Unless that person is in control of his addiction, even the best debt free plan is destined to failure. The correct approach is to seek advice from Gamblers Anonymous before finding a way to clear debt from gambling.
Growth in Numbers Eliminating Gambling Debt by Filing Bankruptcy
Only a small percentage of the population are pathological gamblers. However, the growth in casinos, online gambling sites, race tracks, slot machines and lotteries has meant that more people are now exposed to it. If more people gamble, more people will come to realise that they've got a problem.
Tom Coates, the founder of Consumer Credit of Des Moines, has estimated that about 15% of his clients are insolvent due to problem gambling. This is validated by SMR Research that revealed that the number of people who filed was 11.2% higher in counties that had legalized gambling.
Filing Bankruptcy to Eliminate Gambling Debts in the US
There was a time when debt from gambling couldn't be discharged by filing chapter 7 bankruptcy, but this is no longer the hard-and-fast rule. There are still no guarantees so it is important to seek professional advice before proceeding. Should the creditor object to the discharge of gambling debt, the judge is legally obligated to examine the spending behavior that led to the filer's debts.
The court will seek to ascertain whether a debt was incurred with the intention of ever repaying it. In doing so, they will look closely at the filer's credit activity. Although it is possible to file bankruptcy to clear gambling debts, if all debt is directly attributable to speculation, this could present a problem. It's advisable to hire a bankruptcy attorney as they will be able to provide their professional opinion.
Paying Off Gambling Debt with a Debt Management Plan
If unsecured debt is spread across several credit cards and loans, a debt management plan could provide the answer. Rather than making lots of different payments, the client will make one payment to an intermediary to clear gambling debt at an affordable rate. It is a purely voluntary agreement between a debtor and his creditors and can be canceled by either party at any time.
Although the principal won't be reduced under a debt management plan, most creditors will put a freeze on further interest and charges. Repayments continue until the full amount owed is repaid so it's only suitable for smaller liabilities. Despite the fact that it provides peace of mind, it can take quite a while to pay off debt from gambling as the debtor is paying a reduced monthly payment.
Pay Off Gambling Debt with a Debt Settlement Program
The debt settlement program is the leading bankruptcy alternative for dealing with serious debt problems. Following a series of negotiations, up to 50% of debt from gambling could be eliminated. The actual debt write-off won't take place until 12 to 36 payments have been received by the intermediary. Like a debt management plan, it is also a voluntary agreement.
A debt free plan can help in terms of eliminating gambling debt. However, it is important to appreciate that any debt that is written off will be treated as taxable income by the Internal Revenue Service (IRS). Ken Clark, a Certified Financial Planner, stated that: "If you're going to owe the IRS big money, you'll want to think about it much more carefully." Before proceeding, seek advice from a tax professional.
Sources
Flynn, Sean. (May, 2007). " Is gambling good for America?" Parade Magazine.
Clark, Ken. "No debt forgiveness for the tax man." Investopedia.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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