Gambling debt--is bankruptcy my best option?

[visual77]

Background: Clean 4 weeks from compulsive gambling and I'm on every exclusion list I can find. I started gambling more aggressively in January of this year (small sports better before then) on Draft Kings after I was scammed out of 30K+ online. I'll spare you the details on that, but it sent me into a downward spiral of desperation and deception. I only had about 12k to my name when that happened, and I pulled money from my pension, personal loans, and credit cards to offset the damage. I also kept everything from my wife and family.




I started gambling more aggressively, researching different sports to bet on, joining VIP pages, anything I could do to get an 'edge' on this to win quickly. After some initial losses putting me even further into the hole, I started winning. I was winning at least 1k/day for 3 weeks straight. At the same time, I was paying off loans/CCs in huge chunks to get out of debt.

That winning streak is what ultimately ruined me. Long story short, I lost over 100K total over the past 6 months. I finally hit rock bottom a little over 4 weeks ago after losing 20k that I just borrowed from a family member. Spent 3 days turning 3k into 12k--to lose it ALL in less than hour--then to lose all the money I borrowed over the next hour.



Finances in early January 2021: $12K cash, less than $1k CC debt, $27K student loans, $500K mortgage.

Finances now:
Cash - $1k

$55K in credit card debt, mostly cash advances. Some cards have been paid in full and maxed out multiple times (meaning I'd lose, max a card, win, pay it off, lose, repeat....). All accounts were current as of last month, but all payments were missed this month.

$33K in debt I owe to friends and family.

$8K in personal loan debt

$8K in payday loan debt (and rising quickly from interest)

$12K in pension loan debt (comes directly out of my check)

Additional debts: Mortgage $490K (monthly payment $3k--still in the first year of a recent refinance), Car loan $17K (car worth ~$13k, payment $300), student loans $27k (payment $220). Everything EXCEPT the car is just in my name. The car loan my wife co-signed on,

Yearly NET income: ~$44K over 10 months (no pay July/August--but starting a new summer job shortly that pays $2k/month gross for 2 months-4k total)

Household income (wife is NOT filing): $120K gross / $88K net




Is ch7 my only way out? I have called each of my creditors and asked for more time/forbearance, but most were not willing to do so because my accounts are still current. This month all of the CCs and loans will no longer be current, as I cannot afford to pay them. I'm doing all I can to pay the mortgage, student loans, and car loan. Thank you for any advice you can offer.

[flashoflight]

Are you even eligible for chapter 7? I don't think you are with default expenses. You have to add your wife to the means test even though she is not filing. The trustee will fight you on the martial adjustment. She is going to find out. Above median can get into a 7, but it will require a lot of work given how high your combined gross income is.

The pension debt is not dischargable.

The student loan debt is not dischargable.

Your friends and family won't be happy to see the BK notice, although it's not illegal to pay them back after the BK. Until BK is discharged, you can't preferentially pay the family and friends while hosing the other creditors. The trustee will be looking for preferential payments with the family and friend creditors.

You'd want at least 90 days between the last credit card cash advances and the BK filing. The credit cards won't sue you for quite a while, but the interest on the payday will rack up super fast.

New Jersey does not have a homestead exemption for bankruptcy, so the trustee will be looking for you to buy it back from the BK estate or sell your house to pay unsecured creditors. Unless the house is solely titled to your wife, I think you will have trouble with home equity. Not sure if tenant by the entireties will save you if that's how you titled it. You cannot back out of a chapter 7 filing once you are in. The trustee will fight you tooth and nail to grab the home equity and any other non-exempt asset. You can generally back out of a chapter 13.

If your wife has no debt, this appears to be a 100% chapter 13 plan for five years. You will need part of your wife's income to make the plan feasible in the eyes of the trustee. The interest will stop or be greatly reduced on the unsecured debt, which will help a lot with the cash advances and payday loans.

I think you need to file BK, but it appears to be a 13. You definitely need a GOOD BK lawyer due to the complexity of your case.

[visual77]

Are you even eligible for chapter 7? I don't think you are with default expenses. You have to add your wife to the means test even though she is not filing. The trustee will fight you on the martial adjustment. She is going to find out. Above median can get into a 7, but it will require a lot of work given how high your combined gross income is.

The pension debt is not dischargable.

The student loan debt is not dischargable.

Your friends and family won't be happy to see the BK notice, although it's not illegal to pay them back after the BK. Until BK is discharged, you can't preferentially pay the family and friends while hosing the other creditors. The trustee will be looking for preferential payments with the family and friend creditors.

You'd want at least 90 days between the last credit card cash advances and the BK filing. The credit cards won't sue you for quite a while, but the interest on the payday will rack up super fast.

New Jersey does not have a homestead exemption for bankruptcy, so the trustee will be looking for you to buy it back from the BK estate or sell your house to pay unsecured creditors. Unless the house is solely titled to your wife, I think you will have trouble with home equity. Not sure if tenant by the entireties will save you if that's how you titled it. You cannot back out of a chapter 7 filing once you are in. The trustee will fight you tooth and nail to grab the home equity and any other non-exempt asset. You can generally back out of a chapter 13.

If your wife has no debt, this appears to be a 100% chapter 13 plan for five years. You will need part of your wife's income to make the plan feasible in the eyes of the trustee. The interest will stop or be greatly reduced on the unsecured debt, which will help a lot with the cash advances and payday loans.

I think you need to file BK, but it appears to be a 13. You definitely need a GOOD BK lawyer due to the complexity of your case.

Thank you for your reply.

I have spoken to one lawyer so far and I'm seeking a second opinion as well. He seemed to think I was a good candidate for ch7 and that my wife would not need to file. You stated 'she will find out'--I'm not keeping this from anyone. My wife is fully aware of the process--she has just asked to not have to file or use her income at all until the process is over. Then we will combine and budget together moving forward.

The student loan debt is a private lender if that matters. I do not expect it to be discharged and I'm current on it. The pension I know about and wouldn't want it discharged anyway as I'm paying back into it.

He did say to wait the 90 days as you advised, and I will do doing that (puts me at late August). Is there any chance they could push back even after waiting? On my last day before finally confessing to my gambling addiction, I maxed two cards entirely with advances (6k and 4k).

The lawyer I spoke to seemed to think that the fact that I do not have much equity in the house would work to my advantage and allow me to keep it. He also said the equity would be HALF the actual equity because it is just me filing. My wife and I both own the house. Approximate value is $570K right now, so we have less than $80K equity. Keeping the house is an absolute must as we are never moving again. We have 1 toddler and another child on the way at the end of the year.

My wife indeed has no debt outside of our mortgage and the car loan she cosigned with me. I'm confused as to why you think a 13 is a must if she is not filing and does not want to be a part of the mistakes I made. I gambled the money away, so I should be the one filing and paying for it. I don't want to hurt her anymore than I already have. My lawyer also seemed to think that filing in September, after two months of very little to no pay, would work to my advantage as well.

[justbroke]

visual77 Welcome to BKForum. I see that flashoflight has given you great information on the process. I'm glad to read that you have sought help and that you have taken the steps to deal with the addictive qualities of gambling.

As for Chapter 13 and your spouse's income, flashoflight was just mentioning that when you file, your spouse's income is always included in the calculation as to whether you qualify for a Chapter 7. It's also used, should a Chapter 13 be required, to calculate the payment amount. As you already mentioned, I would sit with 3-5 attorneys and get a good feel for them. If they all say that Chapter 7 looks okay, then that's a consensus.

There's nothing else that I would add.

[flashoflight]

visual77 Of course you should do a chapter 7 solo if it is possible. I like the idea of waiting to file to get a better means test result. The means test is important regardless if you're doing 7 or 13. But just with the rough math in my head on the means test, I see a chapter 13 in your future. But if most of the lawyers say they can squeeze you into a 7 without issue, then go for it. There is a lot of risk going into a 7 because the trustee won't let you out of it due to the non-exempt home equity. The trustee will claim you cannot use closing costs to reduce the trustee's price to abandon the house. But closing costs will factor in whether he can sell your house or not because after costs and trustee commission there has to be a dividend to unsecured creditors. It's going to be close and it will require good haggling skills.

Your lawyer better have very defensible numbers on the means test, I/J budget, and the marital adjustment if you're going solo. I think this is one of those cases where the random chapter 7 trustee draw when the lawyer hits the file button might make a difference in the outcome along with choice of lawyer.

[alaska708]

Would like to hear your outcome. I’m unfortunately in the same boat but it’s not my first time unfortunately. Gambling addiction is a horrible disease, it’s bad.

[MetsfanTom]

I feel compelled to respond to your posting because it hits home for me. I've had a horrible gambling addiction for 25 years and it has in effect ruined my life. I was forced to file a chapter 7 bankruptcy in 2014 and because I couldn't get the addiction under control (as well as three terrible foot surgeries and other health issues requiring so much missed time from work), I needed to file a chapter 13 back in 2019. The sad part is that I still have this horrible addiction which I need to fight on a daily basis, to varying degrees of success. I pray that you can get it under control. As Alaska708 stated, this is a horrible disease. God bless you sir.

[visual77]

I'm likely filing or ch7 this week. I had to wait until 9/1 to pass the means test. My wife and I are both 10 month employees, so looking at the last 6 months from 9/1 (first paychecks 9/15) allows me to pass. I'll let you know how it goes. I have been clean from gambling now for 100+ days.

[alaska708]

You can never be clean from gambling, it will be with you for life as well as the constant urge to gamble. I should know I’ve been going through this since I turned 18 years old, am now 51 and have struggled horribly almost my entire life.

I lost a home, several relationships, my retirement is all gone, my career is gone, it’s just a horrible situation. I wish luck!

[joshuagraham]

The lawyer I spoke to seemed to think that the fact that I do not have much equity in the house would work to my advantage and allow me to keep it. He also said the equity would be HALF the actual equity because it is just me filing. My wife and I both own the house. Approximate value is $570K right now, so we have less than $80K equity. Keeping the house is an absolute must as we are never moving again. We have 1 toddler and another child on the way at the end of the year.

Housing prices are going through the roof; I'll bet that the house is worth more than you think. The trustee will salivate over being able to confiscate that from you, earning his commission in the process. I don't see how you "keep" the house without paying off all your debts.

[visual77]

Housing prices are going through the roof; I'll bet that the house is worth more than you think. The trustee will salivate over being able to confiscate that from you, earning his commission in the process. I don't see how you "keep" the house without paying off all your debts.

Keeping the house seems to be a lock now unless I missed something. I had my 341 today and everything went smoothly. Trustee asked if I was current on my mortgage, no other questions about the house. The entire meeting was about 5 minutes and stress-free.

I'm due for discharge in late November. Looking forward to it. House came in valued at $565K after a CMA was done on it last week. Definitely not worth the trustee's time.

[DeftTouch]

I'm actually stunned they let you do a Ch 7. I know the bk rules changed so a gambling debt was very difficult to discharge as it's all cash.

I too am an addict. In my case, I'm preparing myself with blocking avenues for cash. Still, it's one of the hardest addictions to stay away from

My best to you

[SuvegLo]

This is actually what I do all the time. Data can be collected not just for retrospective tasks, but also throughout the process, according to the basics of data-driven techniques. At the start of the experiment, you can create mathematical models, compare them to real-world performance, make improvements, and come up with a beneficial conclusion for the bets, but humans usually make mistakes and this is why I am using sport betting software, to avoid the human factor.

[visual77]

Discharged!!!

[justbroke]

Congratulations!