Life During Bankruptcy - Gambling
Below is what you need to know regarding gambling and bankruptcy:
The first thing we would like to say is, if you have gambled socially and have not engaged in a deceptive activity to hide assets or fund your gambling, you will not be in trouble.
When it comes to gambling, there are two issues to consider:
- What happens if you gamble during bankruptcy, and
- Whether your gambling prior to bankruptcy was reckless causing your financial position to deteriorate.
Gambling During Bankruptcy
We recommend that you do not gamble during bankruptcy as you cannot keep the money you win, it must be paid to the bankrupt estate. If you buy a lotto ticket and win, the trustee will use the money to go towards paying a dividend to your creditors. If your win is sufficient, the trustee will pay the creditors in full and the costs of the bankrupt estate. Your bankruptcy will then be annulled, and remaining monies paid to you.
If you are addicted to gambling, we encourage you to make an appointment with your doctor and get help as it makes no sense to gamble while bankrupt.
Gambling Prior to Bankruptcy
If prior to bankruptcy you have gambled socially and have not disadvantaged your creditors or engaged in a deceptive activity to fund your gambling, you will not be in trouble when you become bankrupt. Gambling will only be a problem if you have engaged in a deceptive activity to fund your gambling or have gambled in a rash or hazardous way, to the detriment of your creditors.
We often talk to people who enjoy a bet and are concerned as to where the line is, for when their past gambling becomes a problem if they become bankrupt. To give an insight, we have reviewed reported gambling prosecutions by the Australian Financial Security Authority (AFSA). Our overview comment is that the prosecutions relate to what appears to be deceptive behaviour causing assets to be lost or creditors created prior to bankruptcy. To give you a guide below is a sample of prosecutions by AFSA relating to gambling:
- Mr Wilson sold his house in 2015, received over $215,000 and declared bankruptcy in 2017 saying that he had lost the money gambling. AFSA’s investigations revealed that the money had not been lost gambling and Mr Wilson was prosecuted and convicted.
- Mr Trimble sold his house July 2014 and received $189,615. He withdrew $164,000 and became bankrupt October 2015. He told his trustee that he had gambled the funds. Mr Trimble was convicted for not supplying a satisfactory account for what happened to the funds and was sentenced to nine months jail.
- Mr Vidovic became bankrupt in February 2015 with debts of over $861,000. From November 2014 to February 2015, he withdrew more than $365,000 from his bank accounts. He suggested to AFSA that he could not remember but thought that he had gambled the money. Mr Vidovic was convicted by the Magistrates Court.
- Mr King became bankrupt in July 2017. Within 12 months prior, he received over $130,000 from the sale of his property. His liabilities totalled $88,000. Mr King withdrew $76,500 and claimed that he had lost the money gambling. Mr King was convicted by the Dowling Centre Local Court.
- Mr Romi received $30,000 from a property sale in July 2014. He withdrew $24,000 within two weeks and went on a holiday and told AFSA he had gambled the rest. He filed for bankruptcy with debts of more than $113,000. He was convicted by the Brisbane Magistrates Court – with the court saying the money should have been used to pay his creditors.
- Dr Phung became bankrupt in September 2013 with debts of over $1,000,000. Prior to his bankruptcy, he received $138,000 from the sale of a property. He withdrew $126,700 within 12 months of becoming bankrupt and claimed he had lost the money gambling. Dr Phung was convicted by Magistrate Williams who said ‘gambling to win does not excuse Dr Phung of his obligations to his creditors….those creditors were victims and were entitled to their money. By his actions, Dr Phung had deprived them and the estate of funds.’ Dr Phung appealed the decision however the conviction was confirmed.
- Mr Rosenberg was convicted by the Sydney Dowling Centre Local Court in February 2017 of materially contributing to his insolvency by gambling. From 2012 to 2014 he had lost over $1.3m gambling.
We could not find a prosecution against a person who enjoyed a social bet each week.
Tip: Operating a betting account or buying Lotto tickets during bankruptcy is not recommended as the money you win is required to be paid to your bankrupt estate.
If you would like to discuss your situation regarding gambling, you are welcome to give us a call.
To get further insight into how bankruptcy works, we recommend our article Getting On With Daily Life which can be accessed here.