Gambling Debt Bankruptcy

Gambling Debt Bankruptcy

Understanding Gambling Debt & Bankruptcy

With the increasing popularity of casinos, horse racing, and lotteries, the issue of Gambling Debt Bankruptcy has become a common query. This article will delve into this topic and address the critical question: Can gambling debt be discharged in bankruptcy?

What Constitutes Gambling Debt in Bankruptcy?

Firstly, we need to understand the concept of gambling debt. Generally, it falls into two categories:


  • Money borrowed, either directly or via credit cards, for gambling purposes.
  • Loans obtained from a casino, usually known as “markers”.


The source of the debt could be direct – cash advances used for gambling, or indirect – money spent on daily necessities because the individual gambled away their income. Yet, the critical point to understand is that gambling debts, whether direct or indirect, are legally enforceable. Therefore, in the context of bankruptcy, these debts are claims provable under the Bankruptcy and Insolvency Act (BIA).

Gambling Debt and Bankruptcy: Key Considerations

Though it is possible to declare bankruptcy on gambling debt, it’s not as simple as it sounds. Some key factors need to be considered before going down this route:


  • Assets owned by the debtor;
  • Annual income;
  • Previous bankruptcy records;
  • Other debts incurred due to gambling losses;
  • Unpaid taxes resulting from gambling losses;
  • The need for gambling addiction advice;
  • Possibility of discharge from bankruptcy;
  • Alternative options to avoid bankruptcy.


Additional Challenges in Bankruptcy due to Gambling Debts

Choosing to declare bankruptcy can lead to several issues:


Non-exempt assets or equity may be transferred to the trustee. For instance, if you have an interest in a house, your spouse or family member may need to buy it back to provide cash for the creditors.

If your income exceeds a certain threshold, you’ll need to pay surplus income to the trustee for the benefit of your creditors. This payment period extends for 21 months for first-time bankruptcy filers, and 36 months for those who have been bankrupt before.

Creditors, including lenders and credit card companies, may oppose your discharge from bankruptcy if they find that your debts are due to gambling losses.


Bankruptcy Discharge and Gambling Addiction

The process of bankruptcy discharge in the case of gambling debts involves several steps:


  • If a significant amount of unpaid tax is due to the Canada Revenue Agency (CRA), expect them to oppose your discharge from bankruptcy.
  • Under the BIA, the trustee must oppose your discharge if your bankruptcy is a result of gambling debt. This is because certain facts, if proven, make it impossible to get an absolute discharge from bankruptcy.
  • The BIA allows the Court to issue a discharge order that is either absolute, conditional, or suspended. If a fact under the BIA is proven (like gambling leading to bankruptcy), an absolute discharge is ruled out.


The Court and the trustee need to uphold the integrity of the Canadian insolvency system. Therefore, your discharge might be conditional upon you paying a certain sum to your trustee for the benefit of your creditors. Alternatively, your bankruptcy discharge may be suspended for a certain period or completely denied in severe cases.

A bankruptcy discharge hearing is a full Court hearing, and it is advisable to engage experienced insolvency legal counsel for representation.

To increase the chances of obtaining a discharge from bankruptcy, you must demonstrate that you’re taking tangible steps to address your gambling addiction, such as enrolling in a recognized rehabilitation program for gambling addicts.

Bankruptcy is not an Easy Solution for Gambling Debt

As we can see, declaring bankruptcy is not an easy solution to gambling debt. The process involves several considerations and challenges. Therefore, it is always recommended to explore other options like a consumer proposal or Division I BIA Proposal before deciding to declare bankruptcy.

What to do if you’re Considering Bankruptcy due to Gambling Debts

If you’re struggling with unmanageable gambling debts or other addictions, it’s crucial to be proactive. Start by seeking professional advice to discuss your options and make an informed decision. Remember, declaring bankruptcy is a significant step with long-lasting implications, and it should be considered as a last resort.

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