The short answer is yes, it can. You are obligated to disclose the last twelve months of profits and losses from gambling on your bankruptcy petition. If you do receive winnings and it’s listed on your tax return as income, that also needs to be shown on the bankruptcy petition for the last two years. Gambling can affect your ability to file for bankruptcy.
The first issue is whether you have taken out credit lines or personal loans for the purpose of gambling. This is a good faith issue in terms of whether you intended to repay your creditors or if you were purposely going to default. The objective of borrowing money hoping you would make more gambling will not be a valid excuse. Similarly, having a gambling addiction would not be a valid excuse either.
The trustee’s perspective is that if you have $12,000 a year spent on gambling that is $1,000 per month that you should have used to pay your unsecured creditors. The case law also supports this as well. A Chapter 13 might be an option if you have gambled since you are trying to pay creditors back to some extent. Otherwise, depending on the amount you gambled you might have to wait a year of no gambling to file your Chapter 7 bankruptcy case.
If it’s minimal like a few hundred dollars that is less of a concern. However, if you plan to file for bankruptcy, abstain from any type of gambling so you do not compromise your case.
All of your creditors get listed in the bankruptcy petition so as soon as the bankruptcy petition is filed, the court will mail your creditors the 341 meeting of creditor’s notice. The notice has your case number is located on the notice so they can log on and review all pleadings that get filed in the case.
If you have an active state court case where a lawsuit is pending against a creditor we file what is called a Suggestion of Bankruptcy in the underlying case. That alerts the Judge and all the parties in the State Court case that there is an automatic stay in effect, the litigation must stop because of the active bankruptcy. If you have any co-debtors they also receive a notice from the court.
People often ask if their employer gets notified of the bankruptcy. Your employer will not get notice of your bankruptcy filing. Similarly, people also ask if their landlord on a residential lease gets notified. You do have to list any leases/contracts so they do ordinarily receive notice.
This usually does not present an issue as long as, you are making your rent payments on time to your landlord. If you are involved in a domestic violence type of situation, we can get the court to seal the address from your file for your protection.
Your bankruptcy will typically not show up in a general google search so don’t be deterred from filing for bankruptcy because you think you people will find out. The case is filed in Federal Court and requires Pacer access to view case information.
There are occasions that arise either before or during bankruptcy cases where a married couple gets divorced and wants to sell their martial home.
If you are residing in the marital home at the time you file for bankruptcy you can declare it as homestead property, and it is exempt from the trustee taking it. If you decide to divorce and sell your marital home prior to filing bankruptcy, then the proceeds from the sale of the home are not exempt.
You would either have to spend those funds on reasonable living expenses prior to filing your bankruptcy case or invest those sale proceeds into another home. If you are getting divorced in the middle of your Chapter 13 case and want to sell your marital home, you will need to file a motion and have a court order permitting the sale and have a determination made on how the sale proceeds will be spent.
You can typically re-invest the money into a new homestead, as long as, that occurs within a year. You would need to open a new bank account that is clearly titled “Homestead proceeds” and not co-mingle that money with other funds in order to protect those funds.
If you plan to move out of the State of Florida, then the home sale proceeds would not be exempt since you are relocating outside of the state. These situations can be tricky and its best to seek the advice of an attorney prior to making any decisions to ensure those funds are protected.
I will be doing a seven-part series to answer questions on how to get an undue hardship discharge of your student loans in bankruptcy. I have been getting questions from both current and potential clients who have heard about the recent new guidance from the Department of Education / Department of Justice on student loan discharges wondering if the new guidance applies to their situations.
The series will include the following parts:
Part I: What recent changes have been made to assist borrows in qualifying for student loan discharge?;
Part: II: Element #1, Explanation of Present Ability to Pay your Student Loans;
Part III: Element #2, Future Ability to Pay your Student Loans;
Part IV: Element #3, Good Faith Efforts to Repay your Student Loans;
Part V: How does the Debtor’s Assets play a role in dischargeability of their student loans?;
Part VI: When is a partial discharge possible, if the debtor is ineligible for a full discharge of their student loans?;
Part VII: What is the process/procedure to get my student loans discharged?
The new student loan guidance is effective for any bankruptcy cases that are open as of November 17, 2022. Older cases cannot be reopened. You would need to file another bankruptcy case whenever you become eligible. Only loans issued from the Department of Education qualify for the discharge. According to the “Brunner Standard” which is what we have been following: (1) The debtor cannot presently maintain a minimal standard of living if required to pay the student loan; (2) Circumstances exist that indicate the debtor’s financial situation is likely to persist in the future for a significant portion of the loan repayment period; and (3) The debtor has made good faith efforts in the past to repay the student loan.
The current standard is whether the payment of the loan would cause an undue hardship on the debtor. Whether the debtor has a present and future ability to maintain a minimal standard of living while making student loan payments and has made a good faith attempt to repay their student loans. So, the standard is essentially the same. However, there are now clearer guidelines on exactly what those standards mean and the circumstances that would qualify someone. The guidelines are intended to ensure more consistent treatment for student loan discharges and to facilitate an easier fact gathering process for the United States Attorney’s office and the Department of Justice.
SBA Loan funds were intended to be used for normal operating expenses such as rent, inventory, employee payroll, working capital, purchasing products, purchasing equipment, and paying off business debt. If you have misapplied those proceeds and used them to pay your personal bills or only pay yourself disbursements under the loan then the SBA can request an audit. If you do not respond within to their inquiry within 30 days, it will be considered an admission that the loan funds were misapplied.
Penalties include having to pay 1 ½ times the amount of the loan, collections, or even criminal prosecution. Ordinarily SBA loans are dischargeable in bankruptcy. However, if funds were misapplied then you could face a 727 action wherein the United States Trustee’s office will contest the dischargeability of the debt. I would only recommend filing a bankruptcy on those funds if you did in fact use the proceeds for business purposes and your business was still unable to be sustained and you have a bank trail of how the money was spent.
I also look at how much of the loan got disbursed to you personally. For example, if your salary was normally $30,000 annually then you start paying yourself $100,000 salary once you got the EIDL funds those funds that could be considered misapplying those funds. The same if you only paid yourself a salary and distributions and paid no other business expenses. If you have more specific questions, it is best to consult with an attorney.
