Gambling Your Way Into Bankruptcy

The Pathway to Financial Ruin through Gambling

The Allure and Peril of Gambling

Gambling, a thrilling pursuit for some, is a game of uncertainty. It encompasses a variety of activities where money or belongings are at stake, ranging from casino games and slot machines to betting on horse races, buying lottery tickets, speculating on the stock market, or engaging in online gambling.

The possibility of earning a fortune through gambling can be addictive. According to the Centre for Addiction and Mental Health, gambling problems can be classified into five categories: casual, social, serious social gambling, harmful involvement, and pathological gambling.

When not controlled, gambling can wreak havoc on a person’s financial stability. Incurring debts to finance gambling habits can lead to severe financial stress, and in extreme cases, bankruptcy.

Bankruptcy and Gambling in Canada

In Canada, individual bankruptcy cases are regulated by the Bankruptcy and Insolvency Act (BIA), overseen by the Courts and federally Licensed Trustees. While the BIA doesn’t explicitly prohibit gambling, its primary objective is to strike a balance between providing a fresh start for the bankrupt person and safeguarding the interests of their creditors.

This regulation necessitates that the debtor refrain from extravagant living and gambling activities to be appropriately and fully discharged from their debts under the BIA.

Understanding the Discharge Order

A Discharge Order is a legal provision provided by the Courts. In Ontario, this falls under the purview of the Superior Court of Justice in Bankruptcy and Insolvency. A Discharge Order releases a bankrupt person from all claims of their creditors provable in bankruptcy.

An automatic discharge is generally granted nine months after the date of initial bankruptcy, unless opposed by a trustee or a creditor. If the debtor has been directed to make payments of surplus income to the estate, eligibility for automatic discharge comes twenty-one months after the date of bankruptcy.

The BIA’s purpose within this nine-month framework is to provide the bankrupt person an opportunity for rehabilitation and a fresh start, while also investigating the debtor’s financial affairs.

Conduct and Bankruptcy

In bankruptcy proceedings, the Court examines whether the debtor’s conduct led to the bankruptcy. A bankrupt who is honest and sincere and where the bankruptcy was caused by circumstances beyond his or her control will typically receive a discharge.

However, if it is proven that the debtor’s conduct, such as reckless gambling or extravagant living, caused the bankruptcy, the Court may refuse, suspend, or pass a conditional order of discharge.

Conditional Discharge Orders

Conditional Discharge Orders are granted subject to terms and conditions regarding the bankrupt person’s earnings, income, or property acquired post-bankruptcy.

These orders will often require the bankrupt to pay 10% to 50% of the gambling-incurred debts, regardless of their ability to repay. The Court generally ensures that the bankrupt person makes meaningful contributions to their creditors, hence the terms of the conditional order usually address the amounts the creditors could have been offered, particularly where the bankrupt person possesses the means to make these payments.

The Courts aim to discourage credit abuse and deter bankrupts from engaging in reckless gambling activities.

Additional Conditions

A conditional discharge order may also include a ban on the bankrupt from gambling for a certain period. This order may be lodged with the Alcohol and Gaming Commission of Ontario and the national credit bureaus. The bankrupt may also be required to attend and complete a gambling counselling course to the Trustee’s satisfaction.

In certain cases, the Courts have also ordered the debtor not to apply for, obtain, use, possess or acquire credit cards for a specific period.

Courts are generally reluctant to absolve debtors of credit card debts incurred at casinos. Debtors will need to demonstrate significant effort to repay the debts to obtain a discharge.

In Summary

The most crucial goal for a person in Bankruptcy is to obtain a proper discharge. Without it, those declaring bankruptcy may find themselves in a situation where they’ve gone through the entire process of bankruptcy, and yet their debts are not completely absolved.

Expert advice from an experienced Trustee or Certified Credit Counsellor is key to navigating the bankruptcy process efficiently and securing a complete discharge. Decisions about bankruptcy based on casual advice or assumptions can potentially worsen the person’s situation post-bankruptcy.

To avoid opposition to discharge from the trustee or the creditors, debtors can:

 

  • Seek advice from a certified gambling counsellor and receive treatment for gambling addiction.
  • Consult credit counsellors for help in preparing financial budgets and get pre-bankruptcy advice.
  • Attend counselling sessions to learn money management skills.
  • Engage an experienced and knowledgeable Trustee.
  • Demonstrate significant effort to repay the debts.
  • Disclose honestly and accurately to the Trustee:
    • Details of debts owed.
    • Details of how the debts were incurred/spent.
    • Number of members in the family unit.
    • Income of the family unit.
    • Details of assets, other sources of income, savings, and investments.

 

For more information on bankruptcy and debt solutions, contact Bankruptcy Canada. With over 25 years of experience, Bankruptcy Canada has been assisting individuals and families in overcoming debt.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.