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Benefit from the Experience of Attorneys Bill and Valerie Sherman Former Assistant Attorney General, Assistant County Attorneys and Magistrate Judge

Can I Discharge Debt Not Owed to "Legitimate" Creditors in a Bankruptcy?

Question: I like to read your blog at work when my boss isn't looking over my shoulder. I've gotten myself into some money issues so I thought I'd write to you. I have credit card debt that I can't pay. It's with Visa, American Express (AMEX) and MasterCard. But I have to admit I also owe some sports gambling debts and debts to escorts. You guys always say that credit card debt can be wiped away. Can I get rid of my gambling debts and debts to the Atlanta escorts?

Answer: Yes, credit card debt (Visa, Discover, Amex, Master Card) is certainly dischargeable. Debts incurred from vices like gambling (on the NFL, NBA, Major League Baseball, NHL, college football, horse racing, auto racing, NASCAR, soccer, cricket, etc.) can be dischargeable, especially if incurred in a jurisdiction where sports gambling is legal – i.e., Las Vegas, Nevada. Interestingly, if you put your sports wagers on a credit card, they may actually be discharged. You should know that if you fail to pay on an illegal wager (like a bet with an unlicensed "bookie"; there are no licensed bookies in Georgia) a court of law will not render a judgment against you because courts will not enforce illegal agreements. Debt incurred with illegal bets in card games (like poker and Blackjack) or involving slot machines will not be enforced by courts. But if incurred at a legitimate casino in a place like Las Vegas, Nevada; Atlantic City, New Jersey; or in a legal casino in a place like Alabama or North Carolina can be collected by a law suit.

We've heard that Atlanta can be a "hot bed" of vice – a Southern city with more than its share of escorts, hookers, prostitutes and massage parlors. Should someone find themselves as a debtor in such a vice arrangement (of course generally these transactions usually do not involve extensions of credit, deferred payment or repayment plans), you can't be sued, because like I explained for an illegal gambling debt, a court will not issue a judgment against you for an illegal activity. Of course, like so many things, that's not true in every single jurisdiction in the United States of America. There are certain counties in Nevada, for instance, where escorts, hookers and prostitutes are perfectly legal and are highly regulated. And like in the gambling scenario, if such transactions are paid for with a credit card, then they might be subject to discharge in bankruptcy.