Am I Liable For My Gambler's Debt?

by Mark

One of the first things that spouses of gamblers tend to focus on first is thinking about how to protect themselves and their family from the financial hardship that typically accompanies problem gambling. Please note that I'm not a lawyer, and laws can certainly vary by State and country. However, here are some notes from what I've learned that can at least serve as food for thought as you research your particular situation.

- In States where marriage is considered community property (i.e. everything is equally owned by both of you), in its most basis sense, you are liable for the debts of your spouse. So even if you maintain separate bank accounts and credit cards, you can't assume that protects you from collectors coming after YOU for debt your spouse has accumulated. In other words, don't ignore these debts thinking that they'll just go away or won't affect you.

- In some cases if you can show that you had no awareness of certain debt, and did not benefit from it, you may be able to make a case that you're not liable for the debt. How hard this is to prove, and how to go about it is a completely different question though.

- Many people believe that if you ignore calls from your credit card company or debt collectors, that eventually they'll just "write it off" and go away. Depending on your State or country laws, some people will say it's around 7 years before they discharge the debt (i.e. leave you alone). This may or many not always be the case, and may largely depend on the amount of the debt. If it's a few thousand dollars, they may very well write down the debt and leave you alone. However, if it's tens of thousands of dollars, it may become worthwhile for them to sue you, and get a court order to garnish your wages. What that means is that the court will send your employer a letter that requires them to take a given amount of money from each of your paychecks, and send it directly to the debt collector. Most people will want to resolve this before it gets to this point.

- Keep in mind that you can always negotiate with debt collectors in a much more substantial manner than you might think. For example, you may be able to negotiate down from a
$50K debt to $5K or less. They'll typically have a floor below which they simply won't go, however, if you negotiate hard enough, you can usually find it. Also, some will allow you to enter into a payment plan, particularly if the non-gambling spouse is involved, and can demonstrate financial responsibility and control. Note, however, that you'll usually get a better deal (i.e. have to pay less) if you pay a lump sum immediately than if you go on a plan. This is due to the simple fact that a payment plan represents additional risk that you won't pay each month for the full term of the agreement. Thus, up front cash is considered king.

- If you do negotiate a payoff, get everything in writing, and ensure that your obligation to that debtor ends with that payment or payment plan, and that they can't later come after you for more. You'll also need to contact each of the credit bureaus to notify them that the debt was settled; this doesn't usually occur on its own.

- Keep in mind that after negotiating a settlement, they will send you a 1099 at the end of the year for the amount they wrote off. For example, if you owed $50K, and negotiated a $10K payoff, they'll send you a 1099 for $40K. This is considered income, and you'll have to pay taxes on that when you file your end of year taxes. Depending on the amount, your tax bracket, and youe State or country, this could be a substantial amount. For example, you could owe 20% of that $40K, or $8K. The IRS (or equivalent in your country), may allow you to go on a payment plan if you can't afford to pay it, however, they will charge you interest and penalty fees. So you should take this tax obligation into account when you're figuring out how much you can afford to pay for a settlement.

The key message here is not to ignore this debt, and just assume if you wait it out that the debt will disappear, and your credit will eventually automatically recover if you wait long enough. Check the laws where you live and determine your personal liability vs. that of your gambling spouse. Either way, it's going to affect your family unit, particularly if you stay together, so don't keep your head in the sand on this tough topic!

Comments for Am I Liable For My Gambler's Debt?

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Oct 26, 2017
Well Said! NEW
by: Mark

I couldn't agree more. Each individual and family situation is unique, and the affected members should evaluate all options.

The comment about using GA for support, and not for treatment and recovery is a great way to put it; I like that! All the best.

Oct 25, 2017
I Agree!
by: Catherine

I had to come and let Anonymous know I so agree with what you have said here.

Everyone and families are different as far as their finances. We all know our financial picture is devastating when the gambler comes into recovery and many times the finances are put on the back burner awhile if you are also facing relationship problems or possible divorce or both in therapy and the gambler starts treatment.

And yes, GA says you have to be accountable and Bankruptcy is frowned on and looked at as a possible "bailout." I don't agree. If it means saving your marriage and getting over the financial hardship to save that marriage? I'd choose bankruptcy. You do have options with bankruptcy.

It took me a good 3 years to focus on my treatment and recovery and repairing my relationship with my husband before I even thought about the damage to our credit and debts. Pick what is most important first and that is your recovery!

And we finally did and we did file bankruptcy, but to be accountable to my recovery, we chose to do the kind you pay your debts through the court with a trustee. So, another reason why I use GA for my support and not the option for full recovery or treatment...


Oct 24, 2017
Declaring Bankruptcy
by: Anonymous

I don't know that I buy into what GA says about not declaring bankruptcy. I understand the spirit of requiring gamblers to take responsibility, however, if you have a family, that may not be the best option.

I believe that each family has to weigh out the options, and ultimately do what's best for the family. Don't worry, there will be plenty of financial damage that requires taking responsibility! Declaring bankruptcy won't solve all financial problems. It could, however, help to alleviate some of the financial and emotional strain on the family and other loved ones who must endure the consequences of a gambler's behavior.

GA simply isn't thoughtful enough about the bigger picture. I find it far too constraining, with far too little input from actual gambling recovery experts.

To be in GA without having individual therapy is probably close to useless in my opinion.

May 11, 2017
Awesome Financial Info!
by: Catherine

Kudos for all this information. I say this why? Because 10+years ago when I came into recovery from this devastating addiction, no one helped me with "the taking our financial inventory" as Anonymous says.
If you have a meeting group and trusted servants not going with the "Guidelines" of the program, which my GA group wasn't, I got no "pressure relief group meeting."

And, of course, you can't file a Chapter 7 bankruptcy because GA says; "you have to pay your debts and with NO loans, borrowing and such. Best to look into "Consumer Credit Counseling" a non-profit agency, they can help. Also, I had too much debt and qualified for a Chapter 13 repayment plan Bankruptcy and paid off my debt, which was OK with GA.

Took me several years, but I did it. Then took another 2 to 4 years to get my credit cleaned up and that is hard work as well. BUT can be done. It takes time. Just like your recovery journey. Never give up.

GA was NOT MY only choice to getting help. I learned early in my recovery that they would just be my support and be with others like me with gambling addiction. I went through treatment and worked with a recovery coach/specialist for a year as well. My life was worth saving and so is yours!

Author, Catherine Lyon "-)

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