Can I discharge gambling debts? The house has the odds.

by Jay Fleischman, Esq.

January 31, 2010

Why are gambling debts different than other debts? Well if you took out a marker in Las Vegas, you’d better have been in a position to pay it.

A Wisconsin resident learned his lesson the hard way not so long ago. Wisconsin has a strong public policy against the enforcement of gambling debts. Nevada, on the other hand, has a strong public policy encouraging gambling – for obvious reasons. As a result, gambling debts in Nevada are fully enforceable. And if you borrowed money to gamble in Nevada knowing that you’d be unable to honor the marker, the casino would have a very good claim against you that the debt was non-dischargeable.

So our intrepid Wisconsin gambler bet and lost in Nevada. He chalked up quite few markers along the way. And then he went bankrupt back home in Wisconsin.

The casino sued to stick him with gambling debt despite his bankruptcy. The Wisconsin gambler bet that the Wisconsin bankruptcy court would enforce the strict policy of enforcing gambling debts in Wisconsin. But as it turned out, the court held that Nevada law applied. The gambling debt could be enforced and the markers were taken out when the gambler knew he didn’t have the ability to pay them. This case went up to the Seventh Court of appeals which affirmed.

So the moral of the story is – don’t gamble in Nevada if you know you can’t pay your markers. The casino will probably challenge your bankruptcy and may well win. Remember, the house has the odds.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.

Last modified: January 31, 2010