The Best Debt Solution for Gambling Debts

Gambling Losses - Debt Management Plan vs. IVA vs. Bankruptcy

Jan 28, 2009
Asa Ghaffar

Gambling Losses - woodsy

Gambling debts can be a terrible burden. Which debt solution is best for dealing with gambling losses? Is it a debt management plan, an IVA or personal bankruptcy?

The gambling turnover in the UK has now reached £50 billion, representing an increase of 700% since 2001. The number of people that gamble has also increased meaning that gambling debts have grown dramatically because of increasing gambling losses.

There are several suitable debt solutions that could be utilised to pay off gambling losses, including debt management plans, personal bankruptcy and Individual Voluntary Arrangements or IVAs. It's important that those with gambling debts seek counselling and assistance from Gamblers Anonymous (GA) before proceeding with a debt solution.

Why Personal Bankruptcy is Not the Right Debt Solution for Gambling Debts

Surprisingly, personal bankruptcy and gambling debts are a recipe for financial disaster. Since the Enterprise Act 2002, gambling losses constitute a bankruptcy offence. Those that have lost money from speculative activity face a Bankruptcy Restriction Order (BRO) meaning they may not be discharged from personal debts for up to 15 years.

Dealing with Gambling Debts up to £15,000 with a Debt Management Plan

A debt management plan is an excellent way of dealing with more modest levels of gambling debt. Debt management plans are a completely voluntary arrangement between a debtor and his creditors. It involves making a minimum monthly contribution of £100 to an intermediary who disseminates this to creditors on a pro rata basis.

Unlike with an Individual Voluntary Arrangement, there is no debt write off. However, a debt management plan can result in further interest and charges being frozen. It also helps prevent creditor harassment. The downside to debt management plans is that management charges amount to 15% of contributions and it can take a long time to fully clear gambling debts.

Negotiating Serious Gambling Debts with an Individual Voluntary Arrangement

Unlike a debt management plan, an Individual Voluntary Arrangement or IVA is a legally binding debt solution. There is a requirement that 75% of creditors, in terms of value, vote in favour of the IVA. An Individual Voluntary Arrangement allows someone with gambling losses to write off up to 75% of gambling debt.

Most people choose an IVA over personal bankruptcy because it doesn't result in the loss of the family home. However, many tenants choose an Individual Voluntary Arrangement over personal bankruptcy because of the limitations imposed by the Bankruptcy Restriction Order (BRO).

Once 60 monthly payments have been made, the remaining gambling debt is written off. Whilst an IVA is a debt solution for serious financial difficulties, it won't show on a personal credit report once 6 years have elapsed. This six year period starts from the initial payment.

Since the average UK gambling debt has now risen to £25,000, an Individual Voluntary Arrangement is generally the preferred option. However, no debt solution will be effective until the gambling addiction is under control. Always seek help from Gamcare or Gamblers Anonymous before proceeding with a debt solution.