If we’ve said it once, we’ve said it a thousand times. Chapter 13 bankruptcy is a powerful tool to help individuals and families get their finances under control when debt has become unmanageable. Chapter 13 can stop a foreclosure or auto repossession, aggressive tax collectors and collection calls/letters, wage garnishment, and more. Then, it allows the bankruptcy filer, or debtor, to pay back their missed payments over 3 to 5 years, while paying pennies to the dollar on certain types of debt. However, there are certain restrictions. For starters, debtors must show they are making their best effort to pay unsecured creditors, which means allocating their disposable income to these debts. So, it shouldn’t come as a surprise that one of the questions we hear most often is, “Can I gamble while in Chapter 13?”
Can I Gamble While in Chapter 13?
The short answer is N-O. As we just mentioned, when in Chapter 13, the debtor must make their best effort to pay unsecured creditors. This means allocating all disposable income – that money left over after factoring in mandatory bankruptcy payments and approved monthly living expenses – to pay down debt. Approved monthly expenses include food, clothing, housing, utilities, transportation, telecommunication services (phone and internet), healthcare, life insurance, child care, and educational expenses necessary for employment – just to name a few. As you can guess, this leaves no wiggle room for gambling. And if the debtor uses income for gambling instead of paying for an approved expense, the Chapter 13 Trustee may move to dismiss the case. The Trustee may also request that the debtor turn over any winnings to pay down unsecured creditors. Remember, the Trustee routinely checks tax returns for evidence of gambling.
What Happens if My Chapter 13 is Involuntarily Dismissed?
Involuntary dismissal means that a Chapter 13 bankruptcy case is dismissed by the Court at the request of someone other than the bankruptcy filer. This can happen for any number of reasons, but could be a result if the debtor is found to be gambling while in a Chapter 13. When facing Chapter 13 involuntary dismissal, all is not lost. The debtor has a few options.
- Oppose the Dismissal: If the involuntary dismissal is the result of a Trustee’s motion to dismiss, the debtor will have a chance to review and oppose the motion within 21 days. The debtor will need to be able to show proof that the motion for dismissal is the result of a misunderstanding or temporary setback.
- Appeal the Dismissal: When a case is dismissed, the debtor has the option to file a notice of appeal within 14 days of dismissal. However, this process can be extremely complex. The debtor will need to file a legal brief with the court explaining the circumstances and why they believe the court should grant the appeal. Then the debtor will be required to appear at a hearing to present oral arguments and either 1) prove that the court made a mistake or 2) present a very compelling reason why the dismissal should be overturned.
- Refile for Chapter 13: If the bankruptcy is involuntarily dismissed without prejudice, the debtor can refile for Chapter 13 bankruptcy immediately to fix the problems that arose in the first case. If the bankruptcy is dismissed with prejudice, meaning it was dismissed because of a willful failure to abide by court orders or because of a failure to appear before the court at required hearings, the debtor will not be able to refile for 180 days.
- File for Chapter 7 Bankruptcy Instead: If a Chapter 13 case has been dismissed, the debtor may be eligible to file for Chapter 7 bankruptcy instead as long as they are 1) under the income limits for the Chapter 7 Means Test; 2) have assets that can be exempted or is willing to give up non-exempt assets; and 3) meet all other requirements to file under Chapter 7.
Consult a Maryland Bankruptcy Attorney
Chapter 13 bankruptcy is a complicated process. So, if you have questions, like “Can I gamble while in Chapter 13?” it is a good idea to consult a bankruptcy attorney, like Steiner Law Group. We can help you understand the bankruptcy process, evaluate your options, and let you know how much of your disposable income will need to be allocated to pay non-priority unsecured creditors. Steiner Law Group is a boutique law firm in Maryland that assists individuals and businesses with bankruptcy and financial restructuring services. We have helped hundreds of individuals, families and businesses discharge millions in debt.
If you have more questions about Chapter 13 bankruptcy, please schedule a risk free consultation or contact Steiner Law Group, LLC a Baltimore, Maryland law firm at (410) 670-7060 to learn more about bankruptcy options.